Tax Articles - Judi Smith Law

Do you know your taxpayer rights?

Yes, you have rights! And when confronting the IRS, it is important to know your rights. Do you know yours? Chances are you don’t. Some estimate that as many as 46% of people believe that they don’t have rights when dealing with the IRS and most people don’t know all of their rights.

Everyone in the United States and possibly the world has heard of the Bill of Rights in the United States Constitution. As a taxpayer you also have a set of rights. They are not in the constitution and they don’t teach you about them in school, which may explain why they have been hard to find. They have been buried in the Tax Code where only the brave venture without guidance. Recently the IRS announced a “Taxpayer Bill of Rights.” The Taxpayer Bill of Rights takes the taxpayer rights that are granted in the Internal Revenue Code and gathers then together in one place for easy reference. So without further ado, here’s what you have a right to expect from the IRS:

The Right to Be Informed

You have the right to know what you need to do to comply with the tax laws. You are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. You have the right to be informed of IRS decisions about you tax accounts and to receive clear explanations of the outcomes.

The Right to Quality Service

You have the right to receive prompt, courteous, and professional assistance in you dealings with the IRS, to be spoken to in a way you can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.

The Right to Pay No More than the Correct Amount of Tax

You have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

The Right to Challenge the IRS’s Position and Be Heard

You have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider your timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with your position.

The Right to Appeal an IRS Decision in an Independent Forum

You are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. You generally have the right to take your case to court.

The Right to Finality

You have the right to know the maximum amount of time you have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. You have the right to know when the IRS has finished an audit.

The Right to Privacy

Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

The Right to Confidentiality

You have the right to expect that any information you provide to the IRS will not be disclosed unless authorized by the you or by law. You have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose your return information.

The Right to Retain Representation

You have the right to retain an authorized representative of your choice to represent you in their dealings with the IRS. You have the right to seek assistance from a Low Income Taxpayer Clinic if you cannot afford representation.

The Right to a Fair and Just Tax System

You have the right to expect the tax system to consider facts and circumstances that might affect your underlying liabilities, ability to pay, or ability to provide information timely. You have the right to receive assistance from the Taxpayer Advocate Service if you are experiencing financial difficulty or if the IRS has not resolved you tax issues properly and timely through its normal channels.

The key to enforcing your taxpayer rights is being informed. Make sure you know your rights before dealing with the IRS.

IRS Warns of New Email Phishing Scheme Falsely Claiming to be from the Taxpayer Advocate Service

The Internal Revenue Service today warned consumers to be on the lookout for a new email phishing scam. The emails appear to be from the IRS Taxpayer Advocate Service and include a bogus case number.‬

The fake emails may include the following message: “Your reported 2013 income is flagged for review due to a document processing error. Your case has been forwarded to the Taxpayer Advocate Service for resolution assistance. To avoid delays processing your 2013 filing contact the Taxpayer Advocate Service for resolution assistance.”‬

Recipients are directed to click on links that supposedly provide information about the “advocate” assigned to their case or that let them “review reported income.” The links lead to web pages that solicit personal information.‬

Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at phishing@irs.gov. For more information, visit the IRS’s Report Phishing web page.

The Taxpayer Advocate Service is a legitimate IRS organization that helps taxpayers resolve federal tax issues that have not been resolved through the normal IRS channels. The IRS, including TAS, does not initiate contact with taxpayers by email, texting or any social media.‬

For more on scams to guard against see the “Dirty Dozen” list on IRS.gov.‬

IRS Modifies Health FSA Rules to Allow Carryover of $500

Based on public comments, the IRS has announced modifications to the rules for Health Flexible Spending Accounts (FSAs). The changes allow employers to modify their plans to permit an employee to carryover up to $500 to the next year. This change was prompted in part by concerns that lower and mid-wage employees are reluctant to participate in FSAs due to the “use-it-or-lose-it rule”. Additionally, the current structure caused plan participants to make unnecessary expenditures at the end of the year or during the grace period.

Accordingly, an employer, at its option, is permitted to amend its § 125 cafeteria plan document to provide for the carryover to the immediately following plan year of up to $500 of any amount remaining unused as of the end of the plan year in a health FSA. The carryover of up to $500 may be used to pay or reimburse medical expenses under the health FSA incurred during the entire plan year to which it is carried over. For this purpose, the amount remaining unused as of the end of the plan year is the amount unused after medical expenses have been reimbursed at the end of the plan’s run-out period for the plan year.

In addition to the unused amounts of up to $500 that a plan may permit an individual to carry over to the next year, the plan may permit the individual to also elect up to the maximum allowed salary reduction amount under § 125(i). Thus, the carryover of up to $500 does not count against or otherwise affect the indexed $2,500 salary reduction limit applicable to each plan year. Although the maximum unused amount allowed to be carried over in any plan year is $500, the plan may specify a lower amount as the permissible maximum (and the plan sponsor has the option of not permitting any carryover at all).

There are also some limitations that are combined with the $500 carryover option. For example, among others, a plan that adopts the $500 carryover, may not also include the grace period. Also the carryover limit must be the same for all employees.

For additional information on this change, see IRS Notice 2013-71.

The Revenue Officer assigned to my audit says that I don't need a lawyer. Is this true?

IRS agents are trained to seem very friendly and develop rapport with you. They will make it sound like the audit is very simple and nothing to worry about. As a result having a lawyer will be a waste of time. Nothing could be further from the truth. The fact is that a good lawyer will have the audit conducted at their office. While the audit is going on, the lawyer will have only occasional contact with the revenue officer to answer questions and provide documents. Our flat fee pricing reflects this reality. The most important part of the audit actually happens before the revenue officer arrives. At Tax Help by Judy we audit your returns before the IRS does. After that, we can tell you if there are any weaknesses in your returns and get all of the documentation needed to support your return prepared ahead of time. We can also prepare (but not file) an amended return, letting the revenue officer know what changes we think need to be made. With Tax Help By Judy, you’ll know the likely outcome of the audit before it even starts.

I am being audited. Should I use my CPA or an attorney to represent me in the audit?

CPAs are great at accounting and even filing returns. But CPAs are not usually familiar with the ins and outs of the rules and procedures of representing taxpayers before the IRS. Additionally, CPAs have not been trained to interpret case law that decides what the tax law really means. And CPAs haven’t been trained to make legal arguments. For all of those reasons, a tax attorney is a better choice. For more on this topic see our page on the Tax Attorney Advantage.