Question

In 1998, Congress passed legislation concerning shifting the burden of proof to the IRS. The taxpayer must introduce "credible evidence" to shift the burden of proof to the IRS. What constitutes "credible evidence?"

Answer 1

Credible evidence is not evidence which is necessarily true, but is evidence worthy of belief, that is, worthy to be considered by the jury. It is often natural, reasonable and probable as to make it easy to believe.

Pursuant to 89 Ill. (Adm. Code 300.20), "Credible evidence of child abuse or neglect" means that the available facts, when viewed in light of surrounding circumstances, would cause a reasonable person to believe that a child was abused or neglected.”

The 1998 tax law has provided that the burden of proof in tax court cases will be on the government, not the taxpayer. However, it also provides that this can be shifted back to the taxpayer in a number of circumstances, mostly involving lack of taxpayer cooperation with examinations. The issue of who bears the burden of proof is important, even if your case, like most, never goes as far as the tax court. This is because the burden will operate as a background issue that will tend to help to affect the settlement posture of both the taxpayer and the IRS.

The burden of production, also known as the burden of going forward, is the burden of providing sufficient evidence on an issue in order to prevail in the dispute. In Tax Court cases initiated by the IRS, the government bears the burden of production. IRS is internal reserve service.

In order to avoid a shift-back in the burden of proof, the taxpayer must meet his burden of production. That is, the
taxpayer must meet his record-keeping, substantiation, and cooperation requirements.

Conclusion:

The Restructuring and Reform Act of 1998 allows for the shift of the burden of proof from taxpayers to the government, and generally serves to protect the interests of taxpayers who are being audited by the IRS. This policy change benefits taxpayers, who previously had been saddled with the burden of proof in almost all civil tax matters. Taxpayers must provide substantial and credible evidence, meet record-keeping and substantiation requirements, and cooperate with the IRS. The burden of proof oftentimes does not shift to the IRS because the taxpayer feels to meet one of these important provisions. For this reason, the IRS Restructuring and Reform Act of 1998 does not always provide taxpayers much relief from the previous system. From a practical standpoint, meticulous and accurate record-keeping is of the most important so that the taxpayer may be able to shift the burden of proof to IRS.