In the 1986 Tax Reform Act, Congress substantially liberalized the definition of negligent actions by individual taxpayers. Beginning in the 1980s, tax preparers were also subjected to increasing penalties for not exercising due diligence. Yet incredibly, Congress refuses to require the IRS to exercise reasonable caution in using its vast array of enforcement powers. I was very pleased to see the Commission recommend that taxpayers who have been financially harmed or devastated by IRS carelessness should have the right to sue and recover damages when the IRS is negligent. Attorney fee awards are still inadequate.
Taxpayers can suffer enormous financial damages even when they win.
I have often heard reports that the IRS will sometimes crush taxpayers of modest means because agency employees know such taxpayers often cannot afford representation to ensure their rights. Setting aside the issue of whether it is appropriate that taxpayers should be provided rights only to the extent that it does not disrupt collection efforts, the Commission found no evidence that the rights to redress and collection of representation fees provided to the taxpayer under the Omnibus Taxpayer Bill of Rights and Taxpayer Bill of Rights 2 have caused disruption to IRS collection efforts. In addition, the costs of expanding taxpayers' redress have been vastly overestimated. The tax code is so convoluted that no one inside or outside the IRS understands it. Money magazine's annual test of tax preparers this year brought another sad result.