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Our new friend the tax man?

So the IRS is changing ... what does it mean for you?

If you've ever been audited, you know them as tough tax folks who don't play around. Or maybe you view them as roughnecks who take no prisoners come April 15. But is their bad reputation about to change?

Last year, the Internal Revenue Service was rocked by accusations that officers practically preyed on taxpayers in order to meet audit quotas. Last July, President Clinton signed a law to reform the tax-collecting pariah and make it a friendlier institution.

Truth be told, the new law looks to restrict the IRS's power, but that doesn't mean it's open season for tax evasion. Instead, the measure forces the IRS to play a bit fairer by giving you more say in any action the agency takes against you. "This changes the culture of tax collection," says James T. Montgomery Jr., a tax partner at the Washington, D.C., law firm Foley, Hoag & Eliot L.L.P. However, Montgomery says the law won't take the teeth out of the IRS's ability to clamp down on cheats, but instead will give you a better shot at arguing your point of view should you ever be audited by the agency.

For example, the IRS will now have to prove its case against a taxpayer via a lawsuit. In the past, citizens just didn't have recourse to the same due process. In other words, if you were audited, you were guilty until you could prove yourself innocent. Now the burden of proof is more squarely in the IRS's lap, in a court of law. The act also prohibits the sale of a taxpayer's home without judicial approval, nor can the IRS auction property to clear a tax debt of $5,000 or less if the space is currently occupied. And, the IRS will begin accepting tax payment by credit card in 1999.

All this means you'll have a bit more leeway in dealing with what has been a menacing agency in the past. By putting a damper on the tax man's ability to audit and seize properties, the new bill is expected to force the IRS to negotiate more out-of-court settlements and set up installment plans for people who owe back taxes. "Shifting the burden of proof is important because it [changes] the dynamic of negotiations between the IRS and the taxpayer," says Montgomery. In other words, you should have more bite in a proceeding.

The new law also eliminates controversial methods that the IRS used to judge the performance of tax agents. In the past, employees had to meet tax-collection quotas--essentially incentives to bully taxpayers--to move up the agency's ranks. Today, the agency claims to have a new set of standards based on "fair and equitable treatment of taxpayers."

And if that's not enough to calm the more aggressive tax collector, the act makes it easier to recover damages in lawsuits against overly pushy tax agents and calls for annual reports to Congress on alleged cases of misconduct by IRS employees.

Another change aimed at improving the agency's image with the public: the National Taxpayer Advocate office offers local clinics to help taxpayers file returns. And the IRS will become more sympathetic to "innocent spouses" who inadvertently file joint tax returns with partners who are tax cheats. According to Montgomery, "spouses who are legally separated, divorced or no longer living together will also be eligible" to file for taxes due on their separate returns.

The changes couldn't come at a better time. Civilian complaints about the IRS's abysmal customer service record have constantly plagued the agency. According to a customer service survey conducted by the University of Michigan's American Customer Satisfaction Index, the IRS ranked last out of 200 government agencies.

But don't plan on firing your accountant anytime soon. Kathy Burlison, a tax research and training specialist with H&R Block, says the danger is that a lot of people might ease up on keeping good records and cooperating with the IRS should there be a dispute. "The change comes only when your case reaches court, and it only applies if you've cooperated with the IRS up until that time," she says.

Burlison advises keeping extensive records of all earnings and expenditures. Should the IRS come calling, it's best to cooperate as much as possible. After all, the new protections help out only if you have the proof to back up your claims.
COPYRIGHT 1998 Earl G. Graves Publishing Co., Inc.
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Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Anderson, James A.
Publication:Black Enterprise
Date:Dec 1, 1998
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