IRS Bill of Rights

IRS Tax Collection Bill of Rights - Innocent Spouse Relief, Tax Lien, Tax Levy, Installment Agreement and Offer in Compromise

Resolving your IRS Problems: The following IRS Bill of Rights is a list of protections that taxpayers have when trying to resolve your IRS problems. Many of these rights are new, and therefore not always automatically provided for by IRS personnel. You must know your rights and make sure the agent or revenue officer knows them.

1. Innocent Spouse Relief (Publication 971):

a. Must file the papers within 2 years after collection activities begin

b. Is available for ALL understatements of tax (previously, only substantial understatements) attributable to erroneous items (previously, only grossly erroneous items) of the other spouse.

c. Must show that the innocent spouse did not know and had no reason to know of the understatement.

d. Is applicable to any tax liability arising after July 22, 1998 and any tax liability unpaid as of that date.

e. If Innocent Spouse is claimed and rejected, can go to tax court.

f. The IRS can grant equitable relief to taxpayers who do not satisfy the above tests.

g. Can also elect separate tax liability, despite having filed a joint return, if the taxpayers are 1) divorced or legally separated, or b) have been living apart for more than one year. This election must be made no later than two years after the IRS has started collection action and does not require you to be an innocent spouse.

2. IRS must abide by the Fair Debt and Collections Practices Act, such as not communicating with the taxpayer in an inconvenient time or place. Basically protects against harassment.

3. The 10 year statute of limitations period on collection may generally not be extended, if there has been no tax liens on any of the taxpayer’s property.

4. The IRS must give you an installment agreements if:

a. Don’t owe more than $10,000.

b. In the previous 5 tax years taxpayer has NOT 1) failed to file a tax return, 2) failed to pay any tax required to be shown on a return, and/or 3) entered into an installment agreement.

c. Require full payment within 3 years.

d. Can sign up for them on the IRS website! (www.irs.gov)

5. Supervisor must approve the issuance of a Notice of Tax Lien or Tax Levy or seizing property. Does not apply to the automated system until Dec 31, 2000. It is hoped this will reduce abuses of the liens and levies.

6. The IRS must notify the taxpayer within 5 business days after the filing of a Notice of Tax Lien and must include certain information in the notice, such as the amount of the tax and the taxpayer ’s appeal rights.

7. Anyone who will be affected by a filed tax lien is entitled to a fair hearing with an Appeals officer who had no prior involvement with the unpaid tax that gave rise to the filing of the tax lien.

8. The taxpayer may get a certificate of discharge of all tax liens by depositing the amount in question with the IRS or furnish a bond then sue to redetermine the value of the government’s interest in the property.

9. The IRS must release a wage levy once agreement is made with the taxpayer that his outstanding tax liability is uncollectible.

10. The taxpayer and 3^rd parties can sue for money damages for reckless or intentional disregard of the statutory collection provisions. This has been made easier because it includes negligence on the part of an IRS employee. Must follow administrative remedies first and is limited to $100k for negligence and $1m for intentional or reckless disregard.

11. The IRS must notify the taxpayer 30 days before filing a tax levy that he/she has a right to a hearing.

a. Taxpayer can request an appeals officer hear the case.

b. Can not challenge the underlying tax unless had no previous opportunity to do so.

c. If unsatisfied, have 30 days to appeal to the U.S. Tax Court or Federal Court.

12. Increases the amounts exempted from tax levys to $6,250 for furniture and personal effects and $3,125 for tools of the trade.

13. Property can’t be sold below the properties minimum bid price.

a. Where no one is willing to pay the minimum bid price, the IRS can return the property or is deemed to have paid that price, or, if larger, the amount received by the U.S. from the resale of that property.

b. Generally, 80% or more of the forced sale value. Can be less with the group managers approval and taxpayer can challenge.

14. If the amount of the tax levy is less than $5,000, can not levy the taxpayer’s residence.

15. The IRS can not seize the principle residence without prior court approval.

16. The IRS can not reject an Offer in Compromise from a low income employee solely on the basis of the amount of the offer.

a. Does not apply to self-employed.

b. Before sending the rejection letter, should be accorded “an independent administrative review.”

c. After receiving the rejection, taxpayer can appeal to the IRS Appeals division.

17. While you have a pending Offer in Compromise, and 30 days there after, the IRS can not levy against your property. Lengthened if you file an appeal.

18. If you file an Offer in Compromise after January 1, 2000, the collections statute of limitations will not be extended for one year. It is only put on hold while your case is being reviewed.

For additional information on tax liens and IRS levy, see Your Rights as a Taxpayer, Publication 1.

The Tax Law Firm of Chris Rusch can remove your tax liens and tax levy. Please contact us for a free evaluation of your case.