Taxpayers may not be aware, but they have rights when it comes to working with the Internal Revenue Service. The Taxpayer Bill of Rights lists 10 fundamental tax-related rights, ranging from the right to be informed to the right to a fair and just tax system.
The IRS recently highlighted taxpayers' right to challenge the IRS's position and be heard as part of its Tax Tip series. This reminder comes roughly a week after the country survived another Tax Day.
What does the right to challenge the IRS's position and be heard mean?
The right to challenge the IRS's position and be heard means all taxpayers can:
- Raise objections.
- Provide additional documentation in response to formal or proposed IRS actions.
- Expect the IRS to consider their timely objections.
- Have the IRS consider any supporting documentation promptly and fairly.
- Receive a response if the IRS does not agree with their position.
But what does that actually mean in practice? For example, the IRS has to notify a taxpayer that their tax return has a math mistake or a clerical error. In this case, the taxpayer has 60 days to get back to the IRS and tell them they disagree.
In the meantime, the taxpayer should provide any records (or copies of records) that can help correct the error. Taxpayers can always call the telephone number included in the letter or notice for help from an IRS representative.
If the agency agrees with the taxpayer’s position, the IRS will make the necessary adjustments to the taxpayer’s accounts and send them a correction. However, a different set of expectations come into play if the IRS doesn’t agree with the taxpayer’s argument.
In that case, the IRS will send the taxpayer a notice by U.S. mail that proposes an adjustment to their return and notifies the taxpayer they have the right to challenge the proposed adjustment.
To challenge such an adjustment, the taxpayer has to file a petition in U.S. Tax Court. Usually, this petition has to be filed within 90 days of the date printed on the notice—or 150 days if the taxpayer lives outside the U.S.
Taxpayers undergoing an audit by the IRS have the right to submit documentation and raise objections during the audit. If the IRS disagrees, it issues a notice that outlines why it’s increasing the tax.
The taxpayer retains the right to petition the U.S. Tax Court before they pay the adjusted tax and to challenge the IRS’ decision. Sometimes, such as when enforcement actions are needed to collect a tax debt, the IRS has to provide a taxpayer an opportunity for a hearing before the Independent Office for Appeals. These actions can include placing a levy on the taxpayer’s bank account.
Here, too, the Taxpayer Bill of Rights guarantees options for the taxpayer. If the Appeals Office agrees with the IRS a levy is needed, and files a notice of federal tax lien with the appropriate state court, the taxpayer has the right to petition the U.S. Tax Court.
For more on taxpayer rights, appeals and other information, see Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund.
Source: IRS Tax Tip 2022-65