IRS May Not Always Advise Taxpayers of Their Rights

Register now

The Internal Revenue Service is required to notify taxpayers of their rights when requesting an extension of the statute of limitations for assessing additional taxes and penalties, but might not always notify them or their representatives, according to a new report.

In the report, from the Treasury Inspector General for Tax Administration, TIGTA said it believes the IRS is complying with the intent of the law, but there were some instances in which IRS employees did not document whether taxpayers or their representatives were advised of these rights. TIGTA pointed out that taxpayers might be adversely affected if the IRS does not follow the requirements to notify both the taxpayers and their representatives of the taxpayers’ rights related to statute extensions.

TIGTA issued the report Tuesday because it is required by law to annually determine whether the IRS complied with Section 6501(c)(4)(B) of the Tax Code, which requires the IRS to notify taxpayers of their rights to decline to extend the assessment statute of limitations or to request that any extension be limited to specific issues or a specific period of time.

TIGTA’s review of a statistical sample of 51 closed taxpayer audit files with statute extensions found that the IRS is compliant with Section 6501(c)(4)(B). However, TIGTA said it found instances in which the taxpayer audit files did not contain documentation to indicate whether taxpayers were directly advised of their rights before consenting to extend the time to assess tax. In these instances, the taxpayers’ representatives signed Form 872, Consent to Extend the Time to Assess Tax, and were notified of taxpayer rights regarding extending the assessment statute of limitations. Although notification to the taxpayers’ representatives appears to meet the intent of the law, TIGTA noted that the IRS’s internal procedures require the IRS to notify both the taxpayer and the representative.

In addition, TIGTA’s review found instances in which there was no documentation to support that the IRS complied with IRS procedures related to notifying taxpayers’ representatives when an authorization for third-party representation existed.  TIGTA’s review of 36 taxpayer audit files that had authorizations for third-party representation found instances in which the taxpayer audit files did not contain documentation that the taxpayers’ representatives were provided with the required notifications.

TIGTA did not make any recommendations in the report because it said the number of errors was relatively small and the recommendations made in previous TIGTA audit reports are still valid for the issues reported. But while TIGTA made no recommendations in this report, IRS officials were provided an opportunity to review the draft report. However, IRS management did not provide any comments on the report.

For reprint and licensing requests for this article, click here.