New law provides additional assistance in solving client problems.

During the past several years, there have been a number of legislative developments designed to provide additional assistance to taxpayers and their advisers in resolving problems with the IRS. The IRS Restructuring and Reform Act of 1998 (IRSRRA) has expanded on this in an attempt to provide taxpayers with additional rights in dealing with the Service.

Prior to the IRSRRA, one of the most publicized provisions relating to taxpayer rights was that of the Taxpayer Advocate (Advocate), created in 1996 by the Taxpayer Bill of Rights 2. The Advocate replaced the position of Taxpayer Ombudsman, which was a position created by the IRS in 1979. Working through the Office of the Taxpayer Advocate, the Advocate was responsible for identifying and resolving taxpayer problems with the Service, proposing changes in IRS administrative practices in response to such problems and identifying potential legislative changes as a means to mitigate those problems. The Advocate was appointed by and reports directly to the IRS Commissioner.

From a practical perspective, one of the Advocate's most important powers was the authority to issue a taxpayer assistance order (TAO) when a taxpayer was suffering or was about to suffer a significant hardship as a result of the manner in which the internal revenue laws were being administered. A TAO could require the Service to release a taxpayer's property that had been seized as a result of a levy, or it could require the IRS to either take (or refrain from taking) any action otherwise permitted by law, with respect to a particular taxpayer. The Advocate designated the authority to issue TAOs to the local and regional problem resolution officers (PROs). As a consequence, the direct point of contact for taxpayers seeking TAOs was a PRO appointed by a District Director or a Regional Director of Appeals.

Congress felt that the Advocate system created by the 1996 legislation did not provide enough assistance to taxpayers having difficulty with the Service. As a consequence, the IRSRRA contains several new provisions.

The new law renamed the Advocate the "National Taxpayer Advocate." The National Taxpayer Advocate is appointed by the Secretary of the Treasury after consultation with the Commissioner and the IRS Oversight Board. The National Taxpayer Advocate cannot have been an IRS employee during the prior two years and cannot accept employment with the Service for at least five years after ceasing to be the National Taxpayer Advocate. (These employment restrictions, however, do not apply to jobs within the Office of the Taxpayer Advocate.)

The new law replaces the former problem resolution system with a system of local Taxpayer Advocates, who report directly to the National Taxpayer Advocate and are independent from IRS examination, collection and appeals functions. Finally, the law expands the circumstances under which a TAO may be issued if a taxpayer is suffering from or about to suffer from a significant hardship. A "significant hardship" is deemed to occur if one of the following four factors exists:

1. There is an immediate threat of adverse action;

2. There has been a delay of more than 30 days in resolving the taxpayer's account problems;

3. The taxpayer will have to pay significant costs (including fees for professional services)if relief is not granted; or

4. The taxpayer will suffer irreparable injury or a long-term adverse impact, if relief is not granted.

In addition to these items, the Taxpayer Advocate may also issue a TAO in other circumstances if it is determined that the taxpayer is suffering (or will suffer) a significant hardship.

These provisions should be very beneficial to both taxpayers and their representatives in resolving problems with the Service. By providing for more independence in these functions, the people providing assistance and relief to taxpayers should feel less constrained by concerns (whether real or perceived) about the impact of their willingness to assist taxpayers on their careers. At the very least, this new organizational structure should give taxpayers more confidence that they will receive a fair hearing to resolve their tax problems.

Perhaps the biggest benefit is the expanded definition of "significant hardship." This expanded definition should make it easier for taxpayers to qualify for TAOs, which should provide an additional procedural device for resolving many taxpayer problems.

FROM JEFFERY M. WRIGHT, J.D., HOUSTON, TX