11. Appeals videoconferencing alternative for rural areas

Present Law

The IRS has the capability to do videoconferencing. The IRS does not have any program to provide for Appeals conferences by videoconferencing techniques.

Description of Proposal

The IRS would be advised to consider videoconferencing of Appeals conferences for taxpayers seeking appeals in rural or remote areas.

Effective Date

The proposal would be effective on the date of enactment.

12. Require IRS to notify taxpayer before contacting third parties regarding IRS examination or collection activities with respect to the taxpayer

Present Law

Third parties may be contacted by the IRS in connection with the examination of a taxpayer or the collection of the tax liability of the taxpayer. The IRS has the right to summon third-party recordkeepers under Code section 7609. In general, the taxpayer must be notified of the service of summons on a third party within three days of the date of service (Sec. 7609(a)). The IRS also has the right to seize property of the taxpayer that is held in the hands of third parties (Sec. 6331(a). Except in jeopardy situations, the Internal Revenue Manual provides that IRS will personally contact the taxpayer and inform the taxpayer that seizure of the asset is planned.

Description of Proposal

The proposal would require the IRS to notify the taxpayer before contacting third parties regarding examination or collection activities with respect to the taxpayer.

Effective Date

The proposal would be effective 180 days after the date of enactment.

F. Disclosures to Taxpayers

1. Explanation of joint and several liability

Present Law

In general, spouses who file a joint tax return are each fully responsible for the accuracy of the tax return and for the full liability. Spouses who wish to avoid such joint and several liability may file as married persons filing separately. Special rules apply in the case of innocent spouses pursuant to section 6013(e).

Description of Proposal

The proposal would require that, no later than 180 days after the date of enactment, the IRS must establish procedures clearly to alert married taxpayers of their joint and several liability on all appropriate tax publications and instructions. It is anticipated that the IRS will make an appropriate cross-reference to these statements near the signature line on appropriate tax forms.

Effective Date

The proposal would require that the procedures be established as soon as practicable, but no later than 180 days after the date of enactment.

2. Explanation of taxpayers' rights in interviews with the IRS

Present Law

Prior to or at initial in-person audit interviews, the IRS must explain to taxpayers the audit process and taxpayers' rights under that process (Sec. 7521). In addition, prior to or at initial in person collection interviews, the IRS must explain the collection process and taxpayers' rights under that process. If a taxpayer clearly states during an interview with the IRS that the taxpayer wishes to consult with the taxpayer's representative, the interview must be suspended to afford the taxpayer a reasonable opportunity to consult with the representative.

Description of Proposal

The proposal would require that the IRS rewrite Publication 1 ("Your Rights as a Taxpayer") to more clearly inform taxpayers of their rights (1) to be represented by a representative and (2) if the taxpayer is so represented, that the interview may not proceed without the presence of the representative unless the taxpayer consents.

In addition, the proposal would require the Treasury Inspector General to report annually as to whether IRS employees are directly contacting taxpayers who have indicated that they prefer their representatives be contacted.

Effective Date

The addition to Publication 1 must be made not later than 180 days after the date of enactment. The annual reports would begin in 1999.

3. Disclosure of criteria for examination selection

Present Law

The IRS examines Federal tax returns to determine the correct liability of taxpayers. The IRS selects returns to be audited in a number of ways, such as through a computerized classification system (the discriminant function ("DIF") system).

Description of Proposal

The proposal would require that IRS add to Publication 1 ("Your Rights as a Taxpayer") a statement which sets forth in simple and nontechnical terms the criteria and procedures for selecting taxpayers for examination. The statement must not include any information the disclosure of which would be detrimental to law enforcement. The statement must specify the general procedures used by the IRS, including whether taxpayers are selected for examination on the basis of information in the media or from informants.

Effective Date

The addition to Publication 1 must be made not later than 180 days after the date of enactment.

4. Explanations of appeals and collection process

Present Law

There is no statutory requirement that specific notices be given to taxpayers along with the first letter of proposed deficiency that allows the taxpayer an opportunity for administrative review in the IRS Office of Appeals.

Description of Proposal

The proposal would require that, no later than 180 days after the date of enactment, a description of the entire process from examination through collections, including the assistance available to taxpayers from the Taxpayer Advocate at various points in the process, be provided with the first letter of proposed deficiency that allows the taxpayer an opportunity for administrative review in the IRS Office of Appeals.

Effective Date

The proposal would require that the explanation be included as soon as practicable, but no later than 180 days after the date of enactment.

5. Require IRS to explain reason for denial for refund

Present Law

The Examination Division of the IRS examines claims for refund submitted by taxpayers. The Internal Revenue Manual requires examination or other audit action on refund claims within 30 days after receipt of the claims. The refund claim is preliminarily examined to determine if it should be disallowed because it (1) was untimely filed; (2) was based solely on alleged unconstitutionality of the Revenue Acts; (3) was already waived by the taxpayer as consideration for a settlement; (4) covers a taxable year and issues which were the subject of a final closing agreement or an offer in compromise; or (5) relates to a return closed on the basis of a final order of the Tax Court. In those cases, the taxpayer will receive a form from the IRS stating that the claim for refund cannot be considered. Other cases will be examined as quickly as possible and the disposition of the case, including the reasons for the disallowance or partial disallowance of the refund claim, must be stated in the portion of the revenue agent's report that is sent to the taxpayer.

Description of Proposal

The proposal would require the IRS to send the taxpayer an explanation of the reason for the disallowance of the refund claim.

Effective Date

The proposal would be effective 180 days after the date of enactment.

G. Low-Income Taxpayer Clinics

Present Law

There are no provisions in present law providing for assistance to clinics that assist low income taxpayers.

Description of Proposal

The Secretary would be authorized to provide up to $3,000,000 per year in matching grants to certain low-income taxpayer clinics. No clinic could receive more than $100,000 per year.

Eligible clinics would be those that charge no more than a nominal fee to either represent low-income taxpayers in controversies with the IRS or provide tax information to individuals for whom English is a second language.

A "clinic" would include (1) a clinical program at an accredited law school, an accredited business school, or an accredited accounting school, in which students represent low-income taxpayers, or (2) an organization exempt from tax under Code section 501(c) which either represents low-income taxpayers or provides referral to qualified representatives.

Effective Date

The proposal would be effective on the date of enactment.