Taxpayer’s Rights

When it comes to dealing with the IRS, you are in the driver’s seat.

Due the to various bouts of Congressional grand standing and political theater, the tax code is riddled with provisions that help out individuals.

Hit with an audit, no problem, you can appeal it.  Don’t like the results of the appeal, you can have the audit reconsidered.  Want to still challenge results, file a tax court petition.  By the way, you’ll also be offered an additional chance to appeal.

Lose the tax court case and the IRS hits you with an assessment for a few million dollars? Once again, no problem, the IRS still has to collect on that debt.  Don’t like the fact they want to levy (garnish) your wages? No problem you can appeal that decision, and they can’t do anything during the appeal.  Don’t like the results of the appeal? Back to tax court.  Don’t like the tax court decision?  You can appeal that as well.

Below is a snippet from a recent appellate court case that summarizes the various options for taxpayers.

In short, it isn’t that taxpayers have a ton of rights, its that people aren’t aware of all their options when dealing with the IRS. If you want to find out your options when dealing with the IRS, give us a call.  We are attorneys and lawyers who have dealt with IRS and tax problems  for over 30 years.  We serve the La Quinta, Palm Springs, Palm Desert, Indio, Rancho Mirage, Indian Wells and all of Riverside County.


A. Tax Redeterminations and Collection Due Process Hearings

1. Redetermination of Tax Assessments

When the IRS finds a discrepancy between an individual’s income tax filing and records from other sources, it may use a “notice of deficiency” to inform the taxpayer that it intends to collect the difference in owed taxes. 26 C.F.R. section 301.6212-1. If a taxpayer fails to file a return, the IRS may create a substitute tax form under 26 U.S.C. section 6020(b) and file a notice of deficiency for the total amount it calculates as due.

A taxpayer who disagrees with the statement of the amount of taxes owed in a notice of deficiency has two options: pay the amount assessed and then sue for a refund in federal district court or the Court of Federal Claims under 28 U.S.C. section 1346(a), or refuse to pay the tax and file a petition in Tax Court under 26 U.S.C. section 6213 for a “redetermination of the deficiency.” Either of the two court proceedings may result in a redeterminationof the amount of taxes owed by the taxpayer.

2. Collection Due Process Hearings

In addition to seeking redeterminations, taxpayers may also contest the IRS’s means of collecting overdue taxes. The IRS can initiate a lien on a taxpayer’s property, 26 U.S.C. section 6321, and impose a levy on the taxpayer’s property, id. section 6331. In 1998, Congress established the CDP hearing process to temper “any harshness caused by allowing the IRS to levy on property without any provision for advance hearing.” Olsen v. United States, 414 F.3d 144, 150 (1st Cir. 2005); Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, section 3401, 112 Stat. 685, 746 (codified at 26 U.S.C. section 6320, 6330). The statute requires notice to the taxpayer of a right to a hearing before a levy or lien is made and guarantees the right to a fair hearing before an impartial officer from the IRS Office of Appeals. 26 U.S.C. section 6320, 6330.

In a CDP hearing challenging a levy, a taxpayer may raise “any relevant issue relating to the unpaid tax or the proposed levy,” including “challenges to the appropriateness of collection actions,” and “offers of collection alternatives.” Id. section 6330(c)(2)(A). The appeals officer then considers whether any proposed collection action “balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” Id. section 6330(c)(3)(C). The law also affords a taxpayer the right to appeal a CDP determination to the Tax Court. Id. section 6330(d)(1).

CDP proceedings are informal and may be conducted via correspondence, over the phone, or face to face. See 26 C.F.R. section 601.106(c), 301.6330-1(d). A taxpayer may challenge his underlying tax liability at a CDP hearing, but only if he “did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.” 26 U.S.C. section 6330(c)(2)(B).

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