Last week at my other tax blog: Auditing the rich; Watch out for tax scams
Tax volunteer efforts and MLK Day 2012

Taxpayer rights and responsibilities

"Your Rights as a Taxpayer" has the honor of being Internal Revenue Service Publication 1.

But just giving a topic that exalted number-one ranking is not enough says the woman in charge of making sure the IRS does the best possible job.

National Taxpayer Advocate Nina E. Olson wants Congress to codify a Taxpayer Bill of Rights that would clearly list the major rights and responsibilities of taxpayers.

"The U.S. tax system is based on a social contract between the government and its taxpayers," wrote Olson in her 2011 Annual Report to Congress. "Taxpayers agree to report and pay the taxes they owe and the government agrees to provide the service and oversight necessary to ensure that taxpayers can and will do so."

Part of the problem, Olson said in her report, is that even though Congress has enacted three significant taxpayer rights' bills in the last two decades, most taxpayers don't know what their rights are.

"I believe taxpayers and tax administration will benefit from an explicit statement of what taxpayers have a right to expect from their government and what the government has a right to expect from its taxpayers," Olson told Congress.

15 taxpayer rights and responsibilitiesSpecifically, she suggests 10 taxpayer rights and five taxpayer responsibilities she would like to see enacted and enforced.

That combination is this week's By the Numbers figure.

10 Taxpayer Rights: In her report, Olson would like for Congress to organize taxpayer rights under 10 broad principles.

They are:

  1. The right to be informed.
  2. The right to be assisted.
  3. The right to be heard.
  4. The right to pay no more than
    the correct amount of tax.
  5. The right of appeal.
  6. The right to certainty.
  7. The right to privacy.
  8. The right to confidentiality.
  9. The right to representation.
  10. The right to a fair and just tax system.

Potential stumbling blocks: Numbers six and 10 are going to take some major work by Representatives and Senators.

Certainty in the tax code is a persistent problem thanks to a Congress that changes tax laws, or lets them lapse and then reinstates them (sometimes), well beyond any logical time frame.

Remember the estate tax? By the way, the current law is facing expiration again in just over 11 months.

And this year we also have a slew of tax breaks that expired at the end of 2011. (Yes, I'm working on a story and blog posts on these gone-for-now tax laws.)

As for tax fairness, that's a debate that's not likely to ever end.

Even before Occupy Wall Street tents started popping up in public parks, there was outrage over reports of big businesses benefiting greatly from the arcane twists in the tax code.

Was anyone really surprised?

Those firms can afford to hire lobbyists and/or belong to trade groups that spend lots of time and money on Capitol Hill. That guarantees the various business communities influence legislators as they craft tax breaks.

The issue of tax fairness and a more just tax system will continue to be a major topic in the 2012 presidential campaign. But don't expect any substantive changes until well after the November votes are tallied ... if then.

Taxpayer Responsibilities: Meanwhile, Olson doesn't let taxpayers off the hook.

So that taxpayers understand what the law requires of them, the National Taxpayer Advocate recommends in her latest report that Congress organize taxpayer responsibilities under the following five principles:

  1. Obligation to be honest.
  2. Obligation to be cooperative.
  3. Obligation to provide accurate information
    and documents on time.
  4. Obligation to keep records.
  5. Obligation to pay taxes on time.

The report also summarizes prior year recommendations by Olson to create additional taxpayer rights and recommends that those rights be incorporated into Taxpayer Bill of Rights legislation. 

"It has been 13½ years since we have had major taxpayer rights legislation," Olson wrote.  "Our laws have not kept pace with our notions of procedural fairness in 21st century tax administration, particularly given our tax system's expanded and diverse taxpayer base and duties."

Good luck, to Ms. Olson and all of us taxpayers.

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Dr Beric Croome

Interesting article. I'm setting up a tweet link back on 25/1/12

Dr Beric Croome, Tax Advocate and Author of “Taxpayers’ Rights in South Africa”

Mark Randall

Tax payers should also seek out tax relief if they are having tax problems. It is always better to deal with it sooner than later.

Monika Hatfield

Great subject!
It seems that many people forget they have any rights as taxpayers.
I agree that number 6 is currently a huge problem. It is so difficult to plan ahead with our Representatives and Senators constantly struggling to reach an agreement. Too bad that political agenda become more important than people.
Keep up a great work!

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