An opinion piece by CPAmerica member R. Milton Howell, III, CPA, CSEP, Partner, Davenport, Marvin, Joyce & Co., LLP
Several years ago, the IRS issued its “Taxpayer Bill of Rights.” These spell out the minimum standard of service that you should expect from your dealings with the IRS (after all, the S in IRS is for, well, Service.)
To quickly summarize, the “Taxpayer Bill of Rights,” as published by the IRS, is as follows:
1. The right to be informed. You are entitled to clear explanations of laws and to be informed about IRS decisions on your tax matters.
2. The right to quality service. You should expect prompt, courteous and professional service.
3. The right to pay no more than the correct amount of tax. You should pay only the amount you owe and all payments should be applied properly.
4. The right to challenge the IRS’ position and be heard. The IRS will consider your timely objections and documentation promptly and fairly.
5. The right to appeal an IRS decision in an independent forum. Administrative appeals and court actions are available as remedies.
6. The right to finality. You have the right to know when an audit has concluded, as well as the maximum amount of time for the government to audit or collect tax on a particular tax year.
7. The right to privacy. IRS inquiries, examinations and enforcement actions should be no more intrusive than necessary.
8. The right to confidentiality. Information provided to the IRS will not be disclosed unless authorized by the taxpayer or required under law.
9. The right to retain representation. You have the right to have a professional of your choice to deal with the IRS for you.
10. The right to a fair and just tax system. The government should consider other facts and circumstances that affect your tax liability, ability to pay or ability to provide information.
I would suggest that these “official” rights are a great idea, but they are really too conceptual and aspirational. They mean well, but these times require more specific rights that attempt to address the problems that taxpayers are having with our tax system.
Milton Howell’s suggestions for the “Taxpayer Bill of Rights,” written by a taxpayer for taxpayers:
1. The right to a prompt response to your inquiries. You should not have to wait 90 days or more for the IRS to acknowledge and respond to your letter, particularly when the agency may proceed with audit or collection actions that do not take your response into consideration.
2. The right to know what the rules are for that year before the year begins. Too many tax rules are decided at the end of the year, retroactive to the beginning of the year. A few times, it has been retroactive to the beginning of the prior year! This election year of 2014 is likely to be no different, with legislators wanting to wait until after the November elections to push needed tax bills through. You would not play a new board game without knowing the rules first – why should paying taxes be different?
3. The right to a simpler tax code with fewer rules and still fewer exceptions. The rules are just too darn complex, and fewer taxpayers should require a CPA’s assistance for basic tax issues.
4. The right to hold our tax agencies to the same standards of behavior and accountability to which they hold us. If I tell IRS auditors that I cannot get the information because the computer crashed and it could not be saved, do you think they would accept my explanation and drop the matter?
5. The right to greater year-to-year consistency in tax rules. Some tax law changes are quite significant from year to year, and taxpayers should not need to consult a scorecard from their accountant on every financial decision.
6. The right to be able to rely on IRS guidance and responses, whether verbal, in publications or on its website. If the IRS tells us that something is so, we should be able to count on that guidance – even if it is wrong.
7. The right for consistent application of laws, regulations and rulings. Whether an item is “income” should be a uniform answer, and it should not matter whether you are a corporation, partnership, LLC, trust or individual taxpayer.
8. The right to speak to a real person on the phone in less than 30 minutes. No one wants to, and should not have to, spend all afternoon on hold.
9. The right to a business fiscal year-end if it makes economic sense for my business. I realize this is already technically available, but the test hurdles are just too high to be practical. Right now, only the most bizarre fact patterns can make it work.
10. Here’s a technical but important one – the right to a conclusive determination of whether a working arrangement is that of an employee or an independent contractor. Perhaps publish an IRS form that both parties sign, agreeing to the form of the arrangement, and file the form with the IRS. This would provide protection against retroactive government changes to the arrangement. The government could change the arrangement if it is clearly wrong, but not for past years if the form was properly filed.
How about a set of tax rights that actually works for us? After all, it is our government.