The tax bill that squeaked by Congress in its closing days had many closely contested provisions, but there was one that was widely embraced: The taxpayer's bill of rights.
This laundry list of protections for taxpayers provides a great deal of relief at the margin. In a variety circumstances it gives the taxpayer a little more information, a little more access to outside assistance and a little more time to state his case.But it is more of a codification of new thinking on tax collection than a radical departure from practice. In short, this bill of rights is evolutionary, not revolutionary.
"It gives the taxpayer a little more clout, but the IRS can probably live with it without too much trouble," said John Withers, a partner with the public accounting firm of Touche Ross.
In the past, horror stories abounded about people losing time, sleep and property over inadequately explained Internal Revenues Service audit procedures. Rumors refused to go away, though they were always denied, about auditor quota systems and taxpayers being penalized for mistakes they made after following IRS advice.
Finally, pressure mounted and the IRS reacted. Things started to change, slowly. "Most of the provisions we've been working on for some time or were already in place," said IRS spokesman Paul Nirdlinger.
Nevertheless, it helps to have the changes codified by law. They were reviewed recently by Ronald Friedman and Thomas Meyerer, of the public accounting firm Ernst & Whinney. For many taxpayers, perhaps the most significant shift provided by the law is that you can no longer be penalized by following IRS' advice.
After tax reform, the agency hired many new employees to answer questions since many of the old employees were unfamiliar with all of the ins and outs of the new bill.
Unfortunately, for a time IRS employees were just as confused about taxes as were the people whose calls they were fielding. The IRS developed a bad reputation for giving wrong and contradictory answers to those questions. The General Accounting Office found they had less than a 70 percent accuracy rate. Yet someone who underpaid taxes as a result of a bad answer still could pay a penalty.
Now, that is no longer true, as long as you can document your conversation. You will still have to pay the right amount of tax, of course. But if you call the IRS for information, keep careful records of when you called by time and date, with whom you spoke and what they said. Even better, tape it. That is perfectly legal as long as one party to the phone call is aware of the taping.
What if an audit is requested? The IRS must include a clear description of your rights. A new publication by the IRS, called "Your Rights as a Taxpayer," gives a pretty straightforward, if simplified, version of the audit and appeal procedure and could be worth ordering separately. It is called Publication 1 and can be ordered by dialing 1-800-424-FORM (3676).
That is the same IRS number to call for all IRS publications, forms and instructions. While you are on the line, you might consider asking for a copy of Publication 910, "Guide to Free Tax Services."
Should the IRS ask for more money, you have 30 days to respond, instead of the old 10-day period. Should the agency require a personal audit, they must take pains to make the time and the place convenient to you. And if you would rather send an accountant, an attorney, or any other representative instead of going yourself, the IRS is strongly encouraged to deal with your representative. The agency has to get a summons to force you to appear.
By the way, most experts - and amateurs who have been through the audit process - recommend that you always take a representative with you, even if you filed your own return. An experienced attorney or accountant can speak IRS jargon.
The new taxpayer bill of rights also prohibits the IRS from including audit and collection statistics in individual performance reviews. That means that it cannot promote an examiner who "gets more money" out of his audits than another examiner. Nor can it hold examiners to any dollar or number of audit performance standards.
This is yet another protection against the quotas that never officially exist but seem to lurk mysteriously around the edges at the IRS.
Finally, the new legislation beefs up the agency's Problem Resolution Office, a taxpayer's office within the IRS designed to help solve problems that might otherwise be at a standstill. This office now will have an assistant commissioner, reporting to Congress instead of the IRS commissioner. It will also have the authority to stop IRS property seizures while a case is under review.