10

The Right to a Fair and Just Tax System

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

What This Means for You

  • If you cannot pay your tax debt in full and you meet certain conditions, you can enter into a payment plan with the IRS where you pay a set amount over time, generally on a monthly basis. IRC § 6159

    See TAS Toolkit, Installment Agreements.

  • You may request that any amount owed be eliminated if it exceeds the correct amount due under the law, if the IRS has assessed it after the period allowed by law, or if the assessment was done in error or violation of the law. IRC § 6404(a)

    See also IRC § 6502: Limitations on collection after assessment (statute of limitations) under the Right to Finality

  • You may request that the IRS remove any interest from your account that was caused by the IRS’s unreasonable errors or delays. For example, if the IRS delays issuing a statutory notice of deficiency because the assigned employee was away for several months attending training, and interest accrues during this time, the IRS may abate the interest as a result of the delay. IRC § 6404(e)

  • The time limit for asking for the taxes you paid to be refunded may be suspended during the time you are unable to manage your financial affairs due to a mental or physical health problem. IRC § 6511(h)

  • If you have acted with reasonable care you may be entitled to relief from certain penalties. Additionally, if you have a reasonable basis for taking a particular tax position, such as a position on your return or a claim for refund, you may be entitled to relief from certain penalties. Reliance on the advice of a tax professional can in certain circumstances represent reasonable cause for the abatement of certain penalties. IRC §§ 6651, 6656, 6694, 6662, 6676

  • If you use a return preparer who takes an unreasonable or reckless position that results in underreporting your tax, that preparer may be subject to penalties. IRC § 6694

  • You can submit an offer in compromise asking the IRS to settle your tax debt for less than the full amount if you believe (1) you do not owe all or part of the tax debt, (2) if you are unable to pay all of the tax debt within the time permitted by law to collect, or (3) there are factors such as equity, hardship, or public policy that you think the IRS should consider in determining whether to compromise your liability. IRC § 7122 

    See page 289 of the RRA 98 Conference Report, H.R. Rep. No. 105-599 (Conf. Rep.).

  • If you have are experiencing a significant hardship because of IRS action or inaction, tax you may be eligible for assistance from the Taxpayer Advocate Service (TAS). A significant hardship occurs when a tax problem causes you financial difficulties or you have been unable to resolve your problem through normal IRS channels. You may also be eligible if you believe an IRS system or procedure isn’t working as it should. IRC § 7803(c)

  • You have the right to request that the Taxpayer Advocate Service issue a Taxpayer Assistance Order (TAO) on your behalf if you are experiencing a significant hardship. TAS can issue a TAO ordering the IRS to take certain actions, cease certain actions or refrain from taking certain actions, and it can also order the IRS to reconsider, raise to a higher level, or speed up an action. IRC § 7811

  • If you are trying to settle your tax debt with an offer in compromise based on your inability to pay, the IRS considers your income, assets, and expenses in deciding whether to accept your offer. Generally, the IRS uses guidelines for standard allowances for cost of living expenses, unless you will not able to pay your basic living expenses. Then, the IRS must consider your actual expenses. If you are offering to settle because you believe you don’t owe the tax liability, you will not need to submit financial information. IRC § 7122(d)(2)

  • If you are a low income taxpayer trying to settle your tax debt with an offer in compromise, the IRS cannot reject your offer solely on the basis of the amount offer. For example, it cannot reject an offer solely because the amount offered is so low it does not cover the IRS costs for processing the offer. IRC § 7122(d)(3)(A)

  • If you submit an offer to settle your tax debt, and the offer relates only to how much you owe (known as a Doubt as to Liability Offer in Compromise), the IRS cannot reject your offer solely because it cannot locate your tax return to verify how much you owe. IRC § 7122(d)(3)(B)

  • The IRS cannot levy (seize) all of your wages to collect your unpaid tax. A portion will be exempt from levy to allow you to pay basic living expenses. IRC § 6334

  • The IRS must release all or part of a levy and notify the person upon whom the levy was made if one of the following situations exist:  1) the underlying liability is satisfied or becomes unenforceable due to the lapse of time, 2) the taxpayer enters into an installment agreement, unless the agreement specifies otherwise, 3) the release of the levy will facilitate collection of liability, 4) the IRS determines the levy is creating an economic hardship for the taxpayer, or 5) the fair market value of the property levied is greater than the liability and releasing the levy on part of the property would not impair collection of the underlying liability. IRC § 6343(a)(1)

  • If you are an individual taxpayer eligible for Low Income Taxpayer Clinic (LITC) assistance (generally your income must be at or below 250 percent of the federal poverty level guidelines), you have the right to seek assistance from an LITC to ensure that your particular facts and circumstances are being considered by the IRS. IRC § 7526

    For more information, see Publication 4134, Low Income Taxpayer Clinic List.

  • If the IRS is proposing to adjust the amount of tax you owe, you will typically be sent a statutory notice of deficiency, which informs you of the proposed change. This notice provides you with a right to challenge the proposed adjustment in Tax Court without first paying the proposed adjustment. To exercise this right, you must file a petition with the Tax Court within 90 days of the date of the notice being sent (or 150 days if the taxpayer’s address on the notice is outside the United States or if the taxpayer is out of the country at the time the notice is mailed). Thus, the statutory notice of deficiency is your ticket to Tax Court. IRC §§ 6212; 6213(b)

    For more information about the United States Tax Court, see the Court’s taxpayer information page.