While this post is the first installment in a multi-part blog post on taxpayer rights, largely as enumerated in the Taxpayer Bill of Rights, it seems prudent to start with a slight detour. The only reason taxpayer rights are required is because taxpayers also have responsibilities; thus, any conversation centered on rights should at least give a hat tip to those responsibilities.
In this case, the United States has a system of voluntary compliance (something I generally try to say without tongue in cheek given withholding at the source, which itself is a conversation for another day). We have a self-assessment system and citizens, regardless of where on the planet they live, must square up annually with Uncle Sam.
In a (grossly simplified) nutshell, American citizens are required to complete a tax return that accurately reflects earnings from whatever source derived offset by allowable deductions and expenses. They are required to file this return timely (including extensions) and to remit taxes owed, also timely.
For those of you following closely, yes this does align completely with measuring of the tax gap, which considers three behaviors: failure to file, failure to report accurately (e.g., understated income or overstated deductions/expenses), and failure to pay taxes as calculated.
In its enforcement role, the IRS is granted significant power to compel compliance. Because its powers are so great (including but not limited to: substitutes for return assessments; audits, including information document requests (IDRs) and third party summonses; liens/levies) and asymmetric, taxpayers have specifically enumerated rights.
A History Lesson
I’ll jump into the way-back machine at the slightest provocation, so when I stumbled across this 1987 C-SPAN gem, I was all-in.
Thirty-four years ago, seven members of Congress (Senators Pryor (AR), Reid (NV), Grassley (IA), Baucus (MT), and D’Amato (NY) and Congressman Tallon (SC)) stood together to lay down a marker on taxpayer rights. (If you’re a National Association of Enrolled Agents (NAEA) person and find Jeff Trinca at an event, he might tell stories about his boss, Senator Pryor and the early Taxpayer Bill of Rights (TBOR) days. Just don’t tell him I sent you…)
While these members were instrumental in launching TBOR, the rights themselves were not codified until 2015 (at §7803(a)(3)). Credit for this accomplishment is often given to the then-National Taxpayer Advocate, Nina Olson, who spent years (and barrels of ink) advocating for this result.
Why, you may ask, was codification important? In her 2014 Annual Report to Congress, Ms. Olson wrote:
Taxpayers have no simple way to identify or locate rights in the Code because they are scattered throughout its various sections. It is even more difficult for taxpayers to find “off-code” provisions in different pieces of legislation. Some specific rights contain gaps in coverage and fail to protect taxpayers in all appropriate situations. Rights also become diluted over time when they are not updated to reflect the current environment or fine-tuned to account for changes in tax administration. Another reason rights become ineffective is the lack of an enforceable remedy for violations. In some cases, specific taxpayer protections are not effective because they are based on administrative practice instead of a statutory direction, and thus are subject to change.
What Are the Rights?
Recent challenges in tax administration — retroactive tax law changes, a pandemic, required advanced Child Tax Credits — have prompted me to revisit the larger issue of taxpayer rights. As I see IRS decisions, I often ask myself, “how does this align with taxpayer rights?” And I invariably start looking for the list.
It occurred to me, though, that we as tax professionals don’t know the list as well as we should. And we certainly couldn’t list the rights unassisted. Herewith is the list:
The right to be informed
The right to quality service
The right to pay no more than the correct amount of tax
The right to challenge IRS’ position, and be heard
The right to appeal an IRS decision to an independent forum
The right to finality
The right to privacy
The right to confidentiality
The right to retain representation
The right to a fair and just tax system.
Akin to ten commandments, ten rights. No blasphemy intended. Coincidence? We’ll see. My favorite right (and yes I have one—don’t you?) to be disclosed in good time.
More to come and I look forward throughout to a dialog with our readers.