All taxpayers have the right to a fair and just tax system. This is one of 10 rights in the Taxpayer Bill of Rights, which clearly outline the fundamental rights of every taxpayer. The IRS actually publishes these every so often to remind taxpayers of their various rights. We have been blogging on audit issues in recent posts so we thought it would be good to reprint taxpayer Bill of Right # 10 coming directly from IRS as this applies to audits and taxpayer ability to pay. Here’s what the IRS wants all taxpayers to know about the right to a fair and just tax system:
- Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their tax liabilities, ability to pay or ability to provide information timely.
- Taxpayers can receive assistance from the Taxpayer Advocate Service if they’re experiencing financial difficulty resolving their tax issues properly and timely through normal IRS channels. Taxpayers experiencing significant hardships because of IRS action or inaction may also be eligible for assistance from TAS.
- Taxpayers who cannot pay their tax debt in full and meet certain conditions can arrange a payment plan with the IRS. This means the taxpayer will pay a set amount over time, generally monthly.
- Taxpayers can submit an offer in compromise asking the IRS to settle their tax debt for less than the full amount if they:
- Believe they don’t owe all or part of the tax debt
- Are unable to pay all of the tax debt within the time permitted by law to collect
- Have factors such as equity, hardship, or public policy they think the IRS should consider in determining whether to settle the liability
- The IRS has a list of national and local guidelines covering the basic costs of living that it uses when considering a settlement offer reducing someone’s tax debt. IRS employees cannot use these guidelines if they would result in the taxpayer not having enough money to pay their basic living expenses. In these cases, the IRS will use the taxpayer’s actual expenses.
- The IRS cannot seize all of someone’s wages to collect their unpaid tax. A portion is exempt from levy to allow the taxpayer to pay basic living expenses.
- The IRS has the authority to decrease an excessive unpaid portion of any tax or liability assessed after the statutory period of limitations has expired or is erroneously or illegally assessed.
- The IRS has the discretion to decrease interest on an underpayment when an IRS employee caused an unreasonable delay or error, and when no significant aspect of the error is attributed to the taxpayer.
Next week, we will be discussing what taxpayers can do if they cannot afford to pay their tax debt. IRS has some very taxpayer friendly options including the potential to write off some or all of the tax debt in certain circumstances.