C. Provisions Affecting IRS Communications with Taxpayers

PRESENT LAW

Written Communications

The Internal Revenue Service communicates with taxpayers using numerous written and oral means. The principal written methods are tax regulations, revenue rulings and ruling letters, forms and publications, and letters in response to taxpayer inquiries. In addition, the IRS conducts an extensive taxpayer service program through which agency employees respond to taxpayer problems orally.

Tax Regulations, Revenue Rulings, and Ruling Letters

The broadest form of written communication provided for taxpayers by the IRS is tax regulations. Tax regulations provide general interpretations of the Code and are subject to extensive review before adoption as Treasury decisions. Tax regulations generally are published in proposed form before being adopted. Once adopted, tax regulations are binding on the IRS with respect to all taxpayers. A tax regulation may be withdrawn by the IRS at any time the Service determines that it is no longer appropriate by publication of notice in the Federal Register.

The Internal Revenue Service publishes revenue rulings and procedures in the Internal Revenue Bulletin. Revenue rulings and procedures, like Treasury decisions, may be cited as precedent and the positions taken in them generally are binding on the IRS. These interpretations apply the tax law to a specific fact pattern rather than providing broad, general rules. Rulings and procedures generally are subject to review by many of the same offices that review regulations. Typically, however, revenue rulings and procedures are not published in proposed form before being adopted.

The IRS also interprets the tax law through ruling letters and technical advice memoranda. These interpretations generally are subject to less review than regulations and revenue rulings. Ruling letters are issued to a specific taxpayer and may be relied upon only by that taxpayer and only with regard to the specific transaction addressed by the letter.

Forms and Publications

The IRS regularly reviews and publishes all forms and schedules necessary for filing returns for the various taxes imposed under the Internal Revenue Code. These forms range from the Form 1040 (income tax) to Form 706 (estate tax) and Form 720 (excise taxes). Instructions are provided for each form published by IRS. In addition, the IRS publishes and distributes, free-of-charge, more than 90 booklets on specific tax topics. These booklets are reviewed and revised regularly to reflect the most recent changes in the tax law.

Taxpayer Service Programs

The Internal Revenue Service conducts a year-round tax information program in each of its regions, internal revenue districts, internal revenue service centers, and in various foreign countries (through the IRS Office of International Operations). The basic assistance part of the program is operated by a taxpayer service division. Assistance ranges from interpreting technical provisions of the tax law and assisting taxpayers in preparing their returns to answering questions on tax account status and furnishing forms requested by taxpayers.

Taxpayer assistance is provided by three principal methods: (1) telephone assistance; (2) assistance to taxpayers who walk into an IRS office; and (3) taxpayer information and education programs, including programs directed toward special groups.

Telephone Assistance

A toll-free telephone network allows taxpayers to call IRS personnel for tax assistance. This service covers all of the United States, Puerto Rico, and the Virgin Islands. In addition, toll-free assistance is provided to deaf and hearing-impaired taxpayers through a television/telephone/typewriter system.

Walk-in Tax Payer Assistance

The walk-in taxpayer assistance program is available both at permanent and temporary (during the filing season) sites located throughout the country. The scope of the program includes answering taxpayer questions, furnishing tax forms and publications, and assisting in preparation of returns for taxpayers.

Taxpayer Information and Education

In addition to its telephone and walk-in assistance programs, the IRS conducts a year-round public information program with special emphasis on the filing period (January through April). This program includes training participants in several volunteer programs and supervising the programs, directing educational programs for taxpayers, and preparing media efforts for targeted groups and the general public.

The Volunteer Income Tax Assistance Program (VITA), begun in 1969, provides assistance in completing tax returns to low-income, elderly, and non-English speaking persons who may have difficulty obtaining assistance from paid tax return preparers or IRS walk-in assistance personnel. Community volunteers are trained by the IRS in simple tax return preparation skills. The individuals then offer free tax return preparation assistance in neighborhood locations throughout the country.

Tax Counseling for the Elderly, a similar volunteer program, was established by the Revenue Act of 1978 to help meet the special tax needs of persons aged 60 and older. Under this program, the IRS enters into agreements with selected nonprofit organizations which provide volunteers to furnish tax assistance to the elderly. The volunteers are reimbursed by the IRS, through the sponsoring organizations, for out-of-pocket expenses incurred in providing the assistance.

The Student Tax Clinic Program is conducted at certain colleges and universities across the country. Under this program, law and graduate accounting students represent low-income taxpayers before the IRS in examination and appeals proceedings.

Small Business Workshops are conducted in each internal revenue district to educate owners of small businesses, and institutes are available in most districts for tax practitioners on recent tax developments which may affect them.

Disaster and Emergency Assistance Programs are conducted by the IRS in cooperation with other government agencies to provide specialized tax assistance to recent victims of major disasters and emergencies.

The "Understanding Taxes" program provides free student publications to high schools. Additionally, under this program, IRS employees also meet with teachers to explain the publications and answer questions on tax laws and procedures.

Other Investigations and Return Examinations

The IRS annually investigates millions of cases of suspected civil and criminal violations of the tax law. These investigations may arise from a routine examination of a taxpayer's return or as a result of receipt of other evidence of violations of the tax law.

To enforce compliance with the tax law, the IRS also examines or "audits" selected tax returns. Returns generally are selected for examination as a result of a high score on a computer program designed to detect improperly claimed deductions or credits, as a result of underreported income discovered by matching payor information returns (e.g. Forms 1099) with tax returns, or through the IRS' Taxpayer Compliance Measurement Program (TCMP). Most IRS communications in these programs involve suspected civil, as opposed to criminal, violations of the tax law.

EXPLANATION OF PROVISIONS

Reliance on IRS Written Advice

The bill would provide that all written advice furnished by any employee of the IRS acting in an official capacity would be binding upon the Service if the information were provided in response to a specific request by the taxpayer and the taxpayer did not provide inadequate or inaccurate information to the IRS. Therefore, the IRS generally could not collect any deficiency (including interest and penalties associated with any deficiency) which resulted from its incorrect written advice.

Rules Governing IRS Contacts with Taxpayers

The bill would establish new rules governing all interviews with taxpayers conducted by the IRS. Under the new rules, the IRS would be required to conduct interviews at "a reasonable time and place convenient to the taxpayer" and to allow the taxpayer to make a recording of the interview. IRS personnel could likewise record interviews provided they informed the taxpayer that the recording was being made and provided the taxpayer with a transcript of the interview upon request. Taxpayers requesting transcripts would be required to pay the costs of reproduction.

New procedural warnings would be required before any interview with a taxpayer could be conducted by the IRS. Under this new rule, taxpayers would be advised that they had the right to remain silent, that any statement that they made could be used against them, and that they had the right to the presence of an attorney or accountant. These warnings are similar to those provided persons suspected of criminal activity under present law. Under the bill, however, the warnings would apply as well to interviews where no specific violation of civil or criminal law was suspected.