Well, Congress just passed another tax act. The President still has to sign it and make it law. The IRS Restructuring and Reform Act of 1998 has new provisions that favor the taxpayer.

The following information is taken directly from the House Ways & Means website - and annotated with my comments. See notes marked **

New Taxpayer Rights:
The Highlights

"This bill will give David the taxpayer a stronger slingshot to use against Goliath the IRS. It shifts the burden of proof off the taxpayer and onto the IRS, it creates an oversight board to change the way the IRS does its business, and it provides taxpayers with twenty-eight new rights. At long last, Congress is cutting taxes, fixing the IRS, and putting the needs of the taxpayers first. It shows what a difference a Republican Congress can make."

• One percent more in refunds when the IRS is late: Under the current law covering late tax refunds, it's heads the government wins, and tails the taxpayer loses. That's because the government collects three percentage points above a short term interest rate from taxpayers who owe money to the IRS, but it pays two percentage points above the short term rate when the money is owed to the taxpayer. The bill ends this anti-taxpayer bias by eliminating the difference in interest rates. By increasing the refund rate to plus three percentage points, four million taxpayers will receive $269 million in higher refunds.
  

** This is a bit deceptive as a boon. Who is really affected by this?

First, people who file amended returns that create refunds. Those refunds are subject to interest from the IRS - so they win.

Second, people who haven't filed some prior year returns. If those returns result in refunds, the IRS pays interest to them, also. But, they will pay neither interest nor the refund if the return is filed more than three years late.

Third, when someone is audited and the audit results in a refund - they'll get a little additional interest bonus for their trouble.

• Protection for innocent spouses: Following a divorce, some taxpayers - usually women - are forced to pay back taxes for mistakes made on joint returns, even if they had nothing to do with the return other than signing it. To protect these spouses from overzealous collection actions by the IRS, the bill changes the rules so it will be harder for the IRS to collect from these spouses, providing taxpayers with $31 million in tax relief.
  

*** This is terrific! You have no idea how many people, generally women, have had their lives or life-savings completely destroyed by former spouses' financial foibles. Some people think that their divorce agreement, which states that the former spouse will be held responsbile for all tax liabilities will protect them. Don't even think it! Under the old law, the IRS would go after whoever had the most easily attached assets.

I met one woman, the ex-wife of a famous actor who has since died. Her divorce agreement had that provision. But when the IRS audited one of their final joint returns, a very large assessment turned up. For some reason, they did not collect from the actor's current wife (she had inherited his entire estate and all his assets). They did wipe out the ex-wife. Unfortunately, by the time I learned of this it was years past the statute of limitations to correct the injustice.

These days, I work very hard to prevent this problem. This section of the new Tax Act will make it much easier to help.

• Helping the Elderly and the Mentally Disabled Obtain Refunds: If a taxpayer makes a mistake on his or her return, current law gives them three years to catch the error and obtain a refund. The bill creates an exception for people who are mentally or physically impaired - often senior citizens with Alzheimer's Disease - so the statute of limitations can be waived, allowing five thousand Americans to correct their errors and receive the refund they're due. This provision will provide taxpayers with $146 million in tax relief.
  

** This is a start. But what about the others?

Many people just can't seem to deal with filing tax returns. They have jobs and withholding, so they are not worried about owing money to the government. And they are so intimidated by the system that they never bother to file for their refunds. When they finally do come to me (or someone like me) to get caught up, they have refunds due for all the years - and I have bad news for them. They can't have the refunds that are over three years old.

Presently, this term, Mentally Disabled, is often able to be applied to alcoholics and drug addicts, also. This may leave the door open to redeem some additional years worth of refunds for some people. It gives us some additional leeway to fight for refunds. Do we want to leave the definition open to this interpretation.

• Reducing the penalty against taxpayers who are making good on installment payments: The bill caps the maximum penalty imposed on taxpayers who are complying with their installment payments to 9.5%, from its current 25% rate. The current rate is so high it prevents many taxpayers from being able to pay off their total debt to the IRS. This provision will give 750,000 thousand taxpayers $1.0 billion in tax relief.
  

** Hoo boy! This is a good one! It's so discouraging to try to get caught up and to set up an installment plan - only to find that it never ends. Then, if you understand that the interest due is charged on the total of taxes and penalties, you'll be able to see how much in interest is also saved through this penalty reduction.

This provision may reduce the number of bankruptcies people feel compelled to file. You've heard about the huge increase in bankruptcies lately? I don't understand why nobody has ever connected it to the education of taxpayers? As more people have learned that they can bankrupt tax debt, more of them have been filing BK to dump the debt - because they can't come to terms with the IRS.

• Recovery of Attorney Fees and other Costs: Current law limits the amount of money a taxpayer can be reimbursed in cases in which the taxpayer substantially prevails against the IRS to $110 an hour in legal fees in most cases, and it restricts payments to cover only court proceedings. The bill provides taxpayers with $54 million in additional reimbursed costs by expanding the ability of judges to cover more than $110 an hour in fees, and by moving up the point at which reimbursements can be made from court proceedings to administrative proceedings.
  

** Most cases don't ever get to court. I've filed many Tax Court Case and settled every single one of them without ever even having any contact with IRS attorneys (except to write the wording for the final agreement). Would these costs to repesent the taxpayer be within the purview of the court to grant reimbursement? Even though I am not an attorney? And in what court will we have to file the claim for refund? Tax Court, Small Claims, where? Will the cost of litigating to get reimbursed be covered? Just a few questions that need to be resolved.

• Creation of Miranda Rights for taxpayers: The bill requires the IRS to provide taxpayers with plain English explanations of their rights during audits, their right to be represented during an examination, their right to refuse to be examined without the presence of a representative, the reasons why they were audited, and an explanation of their appeal rights and procedures.
  

• Confidential Preparation of Tax Returns: A common law privilege of confidentiality exists for communications between an attorney and client with respect to the legal advice the attorney gives the client. The bill extends this privilege to accountants and others who are authorized to practice before the Internal Revenue Service.
  

** What do you think the effect of this law will be on the preparer's knowledge of criminal activity of the client. Don't hold your breath. What about instances where we are easily able to get information and cooperation from the IRS to get cases resolved? How willing will they be to work with us now, knowing that we are likely not to be equally cooperative? Does that protect tax professionals who deliberately give clients information about how to break the tax law? (Honey, it's still conspiracy and tax fraud!) Does that mean more tax professionals will be willing to take on less scrupulous cleints? Not me!!

• Grants to Help Low-Income Taxpayers Fill Out Their Taxes: Low income taxpayers, particularly those who qualify for the earned income tax credit, often have a difficult time accurately filing their taxes. The bill authorizes $3 million in grants to taxpayer clinics, typically law schools, to provide assistance to taxpayers. This provision is designed to help people receive their EITC checks, while reducing the current 20.7% EITC error and fraud rate.
  

** Great idea! The people who really need the money often don't even file tax returns. While too much of the money goes to those who commit fraud. Don't even ask! (I had to turn away a client whose tax professional prepared fraudulent returns for her and her husband, showing each being unmarried and head of household for one child. It got them back over $5,000 in fraudulent refunds and now she was being audited - I had to refer her to an attorney.)

• Saving Taxpayers Time and Money Through the Small Case Calendar: Current law restricts the ability of taxpayers to use the less costly, less time consuming small case calendar (the tax court's equivalent of small claims court) to disputes involving less than $10,000. The bill increases the cap for small case treatment to $25,000.
  

** This could be really interesting. Particularly if they also allow Enrolled Agents, CPAs and attorneys to be able to practice in Small Tax Court without sitting for the Tax Court exam. There has been some talk of this. Frankly, though, I still don't see any new reasons for me to have to go to court - I can still settle them in Appeals.

• Suing the IRS: To chill the aggressiveness of abusive IRS agents, the bill lowers the threshold required to win a suit against the IRS from current law's reckless or intentional disregard of the law to negligent disregard". Damages would be capped at $100,000.
  

** This will escalate lawsuits. There are so many instances of IRS agents overstepping their bounds and harming and intimidating taxpayers. Often, it's the same agents that behave this way repeatedly. I'd really like to see this brought to the attention of the District Director and have him/her remove the offending agent from the employ of the government. Meanwhile, review the complaints and fix the taxpayer's problems. I see a very positive step in that direction in the form of the monthly Problem Resolution Days.

• Agent Misbehavior: The 1996 Taxpayer Bill of Rights required the IRS to make an annual report to Congress on all categories of instances involving allegations of misconduct by IRS employees that were made either by the IRS or by taxpayers. To further protect taxpayers and to help the IRS monitor and correct abusive behavior by agents, the bill requires that this information be maintained on an individual employee basis.
  

  ** This isn't really as new as you think. The Taxpayer Advocate's office has had that task for years. Why should all of this have to go to Congress. Fix it internally and save taxpayers a fortune!

  And now you have my two cents worth!

  Courtesy of the House Ways & Means Committee