Taxpayer Bill of Rights: The Right to Be Informed

From the Desk of Lauran Corcoran

Taxpayer Bill of Rights: The Right to Be Informed

The Right to Be Informed: Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

What Does The Right to Be Informed Mean?

• Generally, if you owe a penalty, each written notice of such penalty must provide an explanation of the penalty; including the name of the penalty, the authority under the Internal Revenue Code, and how it is calculated.

• If you receive a notice fully or partially disallowing your refund claim, including a refund you claim on your income tax return, it must explain the specific reasons why the claim is being disallowed.

• The IRS must include on certain notices the amount of the tax, interest, and certain penalties you owe and must explain why you owe these amounts.

• If you enter into an installment agreement, the IRS must send you an annual statement that provides how much you owe at the beginning of the year, how much you paid during the year, and how much you still owe at the end of the year.

• During an in-person interview with the IRS as part of an audit, the IRS employee must explain the audit process and your rights under that process. Likewise, during an in-person interview with the IRS concerning the collection of your tax, the IRS employee must explain the collection process and your rights under that process. Generally, the IRS provides you with a copy of Publication 1, Your Rights as a Taxpayer to meet this requirement. This Publication must also explain: 1) how it selects which taxpayers will be audited; and 2) that in certain circumstances you may be relieved of all or part of the tax owed with your joint return. This is sometimes referred to as “innocent spouse relief.”

• If the IRS is proposing to adjust the amount of tax you owe, you will typically be sent a statutory notice of deficiency, which informs you of the proposed change. This notice provides you with a right to challenge the proposed adjustment in Tax Court without first paying the proposed adjustment. To exercise this right, you must file a petition with the Tax Court within 90 days of the date of the notice being sent (or 150 days if the taxpayer’s address on the notice is outside the United States or if the taxpayer is out of the country at the time the notice is mailed). Therefore, the statutory notice of deficiency is your ticket to Tax Court.

Missed Last week’s blog post? Read your Taxpayers Bill of Rights here.