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Understanding Taxpayer Rights

The right to finality ….

When the Pandemic of 2020 hit, the Internal Revenue Service did not have an adequate plan in place to deal with a work stoppage. Many aspects of the IRS operate on computer automated algorithms. Those automated processes were put in place based on the assumption that human intervention would always be available.

For example, if the IRS computer generates a certain Notice (letter) to a taxpayer, if a human does not enter an update to that taxpayer file within a specified period of time, the computer is programmed to automatically generate and send a next level Notice to the taxpayer. If a human at the IRS does not enter updated information within the next specified period of time, the IRS computer can actually instigate automated collection activity against a taxpayer! Right or wrong!

Without human intervention, disaster was inevitable. Disaster is almost all we have experienced in any dealings we’ve had with the IRS in 2020 and 2021.

Taxpayers interacting with the IRS have the right to finality. This right comes into play for taxpayers who are going through an audit. These taxpayers have the right to know when the IRS has finished the audit. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights.

Here’s what taxpayers in the process of an audit, should know about their right to finality:

  • Taxpayers have the right to know:
    • The maximum amount of time they have to challenge the IRS’s position.
    • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. 
    • When the IRS has finished an audit.  
  • The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.   
  • There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.
     
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.   
  • There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy or there’s an ongoing collection due process proceeding involving the taxpayer.  
  • A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.  
  • Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

Since the Covid-19 Pandemic hit in 2020, the Internal Revenue Service has fallen so far behind in their work, I do not see them catching up in 2022! We’ve seen no announcements from the IRS regarding the steps they are taking to gain control of their workload. Many routine issues that we could resolve in 30 to 60 days in the past, are taking more than 12 months as of October 2021!

As of October 7, 2021 our government is not talking about putting “Service” back into the Internal Revenue. No, far from from it. Our government is talking about requiring banks to report all transactions to the IRS on accounts that have a balance of more than $600. Note, that is not transactions exceeding $600, it is all transactions in accounts that have a balance of $600 or more. This is insane!

Source: https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf Page 88 under the heading “Introduce Comprehensive Financial Account Reporting to Improve Tax Compliance.”


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