Legal Definitions - taxpayers' bill of rights

The Taxpayers' Bill of Rights refers to a set of federal laws that establish fundamental protections and privileges for individuals and businesses when they interact with the Internal Revenue Service (IRS).

These rights are designed to ensure fair treatment, transparency, and due process for all taxpayers, empowering them to understand and meet their tax obligations while safeguarding them from potential overreach or errors by the tax agency. Essentially, it outlines what taxpayers can expect from the IRS and what recourse they have if they believe their rights have been violated.

Here are some examples illustrating how the Taxpayers' Bill of Rights applies in different situations:

• Challenging an Incorrect Assessment: Imagine a small business owner, Sarah, receives a notice from the IRS claiming she owes an additional $5,000 in taxes from a previous year, based on what the IRS believes is an underreported income figure. Sarah reviews her records and is confident the IRS's calculation is mistaken.

  The Taxpayers' Bill of Rights ensures Sarah has the right to challenge this assessment. She can submit documentation, explain her position, and have her case reviewed by the IRS. This right prevents the IRS from unilaterally demanding payment without allowing the taxpayer to dispute perceived errors and ensures she only pays the correct amount of tax.

• Protecting Confidential Information: John, a high-profile individual, is concerned that his personal financial details might be improperly accessed or disclosed. He worries that an IRS employee might share information about his income or tax filings with unauthorized parties.

  The Taxpayers' Bill of Rights includes the right to privacy and confidentiality. This means the IRS is legally obligated to protect John's tax information from unauthorized disclosure. Unless there's a specific legal requirement or John's explicit consent, his tax records cannot be shared with third parties, reinforcing trust and security in the tax system.

• Appealing an Audit Decision: After a detailed audit, the IRS auditor proposes significant adjustments to Maria's tax return, which would result in a substantial increase in her tax liability. Maria disagrees with several of the auditor's findings, believing they misinterpret her business expenses.

  Under the Taxpayers' Bill of Rights, Maria has the right to appeal the auditor's decision to an independent office within the IRS, known as the Office of Appeals. This provides her with an opportunity to have her case reviewed by an impartial party before any final tax assessment is made, ensuring a fair and objective resolution process.