U.S. Taxpayer Rights: How Can You Protect Yourself Against the IRS?

When people receive a notice from the Internal Revenue Service (IRS), they pause like deer looking into the headlights and think that their bank account is automatically going to get levied. This is an understandable response, but at some point, they need to look around and understand that before the IRS can take any immediate collection action against them, they have taxpayer rights.

When we, as practitioners, inform prospective or current clients that they have taxpayer rights, appeal rights, and professional rules of engagement, they usually do not know the extent to which they are protected as U.S. taxpayers. Most people feel that they have no rights because they owe the federal government, but, in fact, they have many rights to which they are entitled. You should make prospective or current clients aware of those rights should they need to enact them against the IRS.

Taxpayer Bill of Rights

The IRS has created a Taxpayer Bill of Rights that lists the various rights that a taxpayer is entitled to:

• 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 the IRS’s Position and Be Heard
• The Right to Appeal an IRS Decision in 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

These rights are fundamental, and if you feel as if you are not having your rights enacted during the resolution of your IRS matter, you have the right to request a manager conference call or take one of the below avenues in order to ensure you are being treated fairly.

Appeals Avenues

For every lien or levy action taken by the IRS, you are granted a 30-day window to file an appeal. Your appeal actions can be exercised either via a collection due process request or a collection appeal process request.

Collection Due Process Request (CDP)

To appeal via this route, file a Form 12153, Request for a Collection Due Process Hearing, and send it to the address shown on your lien or intent to levy notice within 30 days of the CDP notice date. Filing a timely request for a CDP hearing protects your right to go to Tax Court if you disagree with the appeals determination.

A CDP also allows a taxpayer to dispute penalties as well as create a collection resolution. The CDP does not focus on appealing the action of the IRS employee but instead on resolution and enforcement.

Collection Appeal Process Request (CAP)

If you disagree with the decision of an IRS employee, you can appeal these collection actions under CAP within 30 days:

• Before or after the filing of a Notice of Federal Tax Lien (NFTL).
• Before or after the serving of a notice of levy.
• Before or after the seizure of property.
• After the denial of a request for property to be discharged from a lien.
• After the denial of the subordination of a lien.
• After the denial of the withdrawal of an NFTL.
• After the denial of the issuance of a certificate of non-attachment.
• After termination, proposed termination, modification, or proposed modification of an installment agreement (IA). [Note: a modification can involve a proposal by the IRS or the taxpayer.]
• After rejection of an installment agreement IA.
• After the disallowance of a taxpayer’s request for return of levied property under IRC 6343(d).
• After the disallowance of a third-party property owner’s request for return of wrongfully levied property under IRC 6343(b); third-party claims to property including alter ego and nominee liens.

You can appeal to the employee’s manager, and the manager will generally hold a conference with you. There are no U.S. Tax Court rights with a CAP, although, in certain cases, you can request a judicial review.

Taxpayer Advocate

The IRS Taxpayer Advocate is a separate organization within the IRS; think of it as your mediator. If taxpayers believe they are not getting the resolution they need through the regular IRS channels, the Taxpayer Advocate has the ability to bridge the gap. It has the ability to help with all collection, audit, or other tax issues that a taxpayer may need. For instance, the Taxpayer Advocate can assist with things such as amended returns, refunds, installment agreements, reopening closed appeal windows, or helping prevent unlawful seizures. Be aware, though, that the Taxpayer Advocate does not take all cases that are submitted. Because the size of its workforce is a fraction of that of the IRS, it can only take the cases of taxpayers who are truly in hardship situations.

U.S. Treasury Inspector General for Tax Administration Filing

The U.S. Treasury Inspector General for Tax Administration (TIGTA) was created to act as the guard dog of IRS personnel. Think of it as the governmental human resources department for the IRS. Its job is to provide oversight services to make sure that all IRS employees are maintaining integrity and efficiency when providing services to taxpayers. Taxpayers file a TIGTA complaint with the department stating their grievances with the behaviors of any IRS employee. Once filed, a formal investigation is opened on not only the employee but also his or her superiors. That investigation can either stick and have repercussions on the employees—such as termination of employment, leave of absence, or reprimands—or it can amount to nothing, and the taxpayer will go back to interacting with the IRS employee. However, be aware that if nothing is determined through the investigation, it might create some tension in your future communications with the IRS. Professionally, we would say that filing a TIGTA is not an everyday action. There are various levels of managers with whom to air your grievances, and we always suggest going that route first before filing a formal TIGTA complaint within the IRS.

Always Know Your Rights

This is not an exhaustive list of your available routes and actions as a taxpayer, but it is a start. Whenever engaging in dialogue with a government agency and employees, always go in knowing your rights and how to enact them should things go upside down.