You've put your tax worries behind you for another year, you think, when the Internal Revenue Service sends you a nasty note. Somehow, its computer shows that you owe zillions of dollars in back taxes, so it's going to freeze your bank account immediately. Your mortgage payment is already late, and a day of frantic phoning leaves you in a bureaucratic gulag.
Nightmarish situations such as this happen to thousands of taxpayers every year. But even in the IRS's eyes, such tax snafus can create significant hardships. And when they do, there's a useful, if little-known, way out.
It's the taxpayer assistance order (TAO), created by the Taxpayer Bill of Rights that Congress passed in January, 1989. Meant to rescue people in fiscal emergencies, a TAO amounts to an "internal injunction" against IRS action, says Robert Nath, an attorney with Odin, Feldman & Pittleman in Fairfax, Va., and a tax-controversy expert for Bender's Federal Tax Service.
DEFUSED. Few taxpayer pleas result in a formal TAO. That's because a "good majority" of the roughly 16,000 people each year who ask for one get enough informal help from an IRS problem-resolution officer to defuse the crisis, says Gerald Portney, director of tax controversy at KPMG Peat Marwick in Washington. There's at least one problem-resolution officer whom you can call or visit at every IRS district office.
So how does this officer decide which TAO pleas to consider? An IRS manual says significant hardship can exist when IRS actions might cost a taxpayer his or her job, prevent closing on a house, staying in school, obtaining medical care, or acquiring "reasonable clothing and/or shoes."
In a reversal of the usual burden of proof, the manual says the problem-resolution officer should resolve any doubt about getting involved "in favor of the taxpayer." And instead of sticking to the financial facts as usual, the officer is instructed to consider whether the taxpayer is "overwhelmed by the enormity of the tax situation," as demonstrated by "crying, despair, threat of personal harm, etc."
FAST RELIEF. No, you shouldn't try to fake tears. TAO officers are notoriously hard to fool, according to tax advisers. Besides, melodramatics aren't necessary. Problem-resolution officers are the only people among 120,000 IRS employees who are "required to be advocates for the taxpayer," says Portney. Typically, they can bring relief from heavy-handed colleagues in 48 hours.
In an income-tax emergency, you don't dial 911, of course. You fill out a form: #911.