By
The Burden of Proof
1. Complies with statutory and regulatory requirements for substantiation of any item (which means that you must comply with the law and cooperate with IRS during the examination of your return);
2. Maintains records (so you can't just throw your paper bag full of scraps of paper on the IRS auditor's desk and say, "You find it!!!");
3. Cooperates with reasonable requests by IRS for meetings, interviews, witnesses, information, and documents.
So for the vast majority of us, the burden of proof issue is much more sizzle than steak. If you DO find yourself face to face with the IRS in the courtroom, the burden of proof issues may play to your advantage, but for the majority of us who never move past the audit or appeals level of the IRS, these changes will mean virtually nothing.
Innocent Spouse Rules
Accountant-Client Privilege
IRS Restructuring
Collections
Next week we'll wrap up our brief look of many of the provisions of the new law.
-- Roy Lewis
Please note that Roy cannot answer individual questions via e-mail. If you have tax questions, please ask them on the taxes message board. Thanks!
Next: 1998 Tax Changes Part III »
Much has been made about the "burden of proof" issues found in the new law. Many think that this means that they will not have to provide any information if they are audited in the future because the burden of proof is on the IRS to prove taxpaying errors. Nothing could be further from the truth. First, the burden of proof issue applies only to court proceedings, which take place LONG after the initial audit has taken place. Not only does the burden of proof shift very late in the process, and only in court cases, it will ONLY shift if the taxpayer:
The new law makes innocent spouse relief easier to get. Before the passage of the act, if spouses filed a joint return, each spouse would be jointly and severally liable for the full amount of the tax, penalties, and interest arising out of that tax return, regardless of the amount of the spouse's separate income. But the new law provides for new elections that can be filed by spouses who previously filed jointly, but who are now divorced or separated, that may provide total relief for underpayments of tax that the "innocent" spouse knew nothing about. Those who don't qualify for total relief may at least be able to get partial relief from liability.
You are all aware of the "attorney-client" privilege to withhold confidential information, but many of you might not know that privilege did NOT cover an accountant-client relationship prior to the passage of the 1998 Act. That's all changed now. The new law extends the attorney-client privilege of confidentiality to tax advice furnished to a client by any individual authorized to practice before the IRS (CPAs, Enrolled Agents, and Enrolled Actuaries). And while this privilege is only limited to tax advice (and not necessary documents and work product), the taxpayer has been provided at least some additional protection.
The new law revamps the governance and structure of IRS in a number of ways designed to make it more responsive to taxpayers' needs. IRS's current geographic structure will give way to operating units serving particular groups of taxpayers, such as individuals or small business. In addition, the Taxpayer Advocate's office will be more independent and will have the authority to provide assistance to taxpayers in a wider array of circumstances. The IRS has also been mandated to do more to promote paperless filing and to provide incentives for use of electronic filing of information returns.
There have been a number of MAJOR changes relative to collections, liens, levies, seizures, and the offer-in-compromise and statute of limitation issues. Many tax professionals, especially those who deal with IRS collection issues on an ongoing basis, believe that these changes are the backbone of the new law. The changes are many and technical, and certainly can't be discussed here. But be aware that if you find yourself in a problem with the IRS collection people, you now have many new rights and options that you should be aware of.