Taxpayer Bill of Rights  

Confessions of an IRS AGENT

by Jack W. Wade Jr., with Jack Shafer, April 1983

What's a Nice Kid Like You Doing in a Place Like This?

Some kids yearn to be firemen or ballet dancers when they grow up. I've yet to meet anybody who wanted to be an IRS man; I was no exception. But when I graduated from college in 1970 the economy was scraping bottom. The job market wasn't exactly screaming out for B.A.s in political science, so I took the federal civil-service exam, imagining a career at the Department of Housing and Urban Development or Health, Education, and Welfare. After all, the government can't go out of business, it rarely lays people off and it pays reasonably well. It looked like a secure place in insecure times.

I scored high on the exam - over 95 - and waited for the various departments to come knocking on my door. But the only government agency that even nibbled on me was the IRS. My initial interview was not as harrying as some I've heard of. (One female applicant once left her IRS interview in tears, never to come back, causing my boss to mutter, "Women aren't tough enough to work for the IRS.") My interviewer warned me that the position that was open - revenue officer - would sometimes require me to do distasteful things. Was I man enough to seize the automobile of a broke and delinquent taxpayer? Could I slap a seizure notice on the home of a destitute family? How would I feel about abducting a man's bank account for payment of back taxes? How did I feel about staring down the shotgun of an irate citizen? While this wasn't exactly a description of the job of my dreams, I certainly wasn't opposed to fair and reasonable collection of taxes. I promised myself that I wouldn't remain a revenue officer for the rest of my life. I figured I'd be able to move up to an administrative post or return to the private sector someday. Besides, I wanted to marry my college sweetheart. I needed the job. I signed on.

My planned "short stint" ate up the rest of the seventies. My interviewer was absolutely right - the job demanded a strong stomach. But only rarely were taxpayers responsible for the repugnant things I saw; most of the hate and harassment came from the IRS bureaucracy. As I soon learned, the paramount goal of the collections division of the IRS is not to collect taxes, but to collect statistics. Statistics on seizure of property. Levy statistics. Closed-case statistics. Collecting the money is not as important as closing the case, we were taught. "Go out and use a firm enforcement image" - whatever that implied.

Those were our marching orders. Why? Because there are nowhere near enough IRS agents to personally deal with every single taxpayer. So the IRS has set up a network of auditors, investigators, and collectors (such as I was) to instill fear of the IRS in the mind of the public. In IRSpeak, payment of taxes under duress is called "voluntary compliance." (To this end, the busting of gangster Al Capone over forty years ago was the best thing that ever happened to the IRS. You would not believe how many interviews with delinquent taxpayers begin with their earnest promises of cooperation because they remember that the IRS put Capone on Alcatraz when none of the other G-men could touch him.) For the better part of a decade I was part of that network. I pursued my share of the million-some-odd delinquent tax cases that come up each year. I was part of a group that was supposed to impress taxpayers with our enforcement powers - powers that send a shiver of dread through some people.


When Morley Safer Worked for the IRS

If you think I'm exaggerating, let me point to the lead segment of "Sixty Minutes" that aired on February 6 of this year. Presenting his story as if it were a major scoop, correspondent Morley Safer told the story of how the Feuer Trucking Company of Yonkers, New York, was closed by IRS agents. Two and a half years ago Feuer's owner admitted to his employees that the company was hauling more red ink than anything else. Feuer was two million dollars in debt - and half a million of that was owed in back taxes to the IRS. The taxes plus the heavy interest payments marked Feuer for bankruptcy.

To save their jobs, many of the employees got together and offered the owner $25,000 for the company. The owner accepted. Feuer Trucking began repaying its debts both to its creditors and to the IRS, negotiating installment payments of $3000 a week to pay off back taxes while it continued to pay current taxes. But because of the high interest rates and penalties the IRS was charging on the old taxes - 26 percent - the IRS debt was growing faster than Feuer could pay it off. It passed $800,000.

Just before Christmas, 1982, the IRS struck. Officer Donald Raftery seized the $60,000 in Feuer's bank account, and notified Feuer's customers to pay their bills not to Feuer, but directly to the IRS. He also demanded a down payment of $400,000 on back taxes. Feuer didn't have it. So the next day a squad of IRS officers (looking like Heinrich Himmlers in Brooks Brothers suits according to one employee), backed up by a small army of U.S. marshals, swooped down on Feuer. Pay up the $851,000 in back taxes, the officers barked, or we will seize and sell everything. Of course, Feuer still didn't have the money, so the officers tagged everything in the office for seizure - including desks, typewriters, and file cabinets.

The office manager confronted Raftery. "Mr. Raftery, do you recall in July that I told you what we were worth? I spelled it all out to you in black and white on paper?" Raftery agreed that he knew that Feuer, which leases its trucks and building, had less than 10 percent of the $851,000 in assets. "I said, 'Why did you take this action?'" recalled the office manager. "He just shrugged his shoulders.".

The IRS eventually returned Feuer's typewriters and desks, but kept the $60,000 it had seized from the bank account. Even more devastating to Feuer, the IRS did not return its Interstate Commerce Commission license to operate. Without a license, the trucks couldn't legally go anywhere. Feuer was out of business. If the "Sixty Minutes" story is true, the IRS had shut down a company that was paying current taxes and paying its employees. Fifty workers were added to the unemployment dole.

Morley Safer was beside himself. "No matter how you add it up, the government is losing by closing the company down. We asked the IRS to comment on this, to explain the logic behind their action. They wouldn't see us, but they did tell us on the phone, and I quote, 'In this matter it would not be to our advantage to comment.'".

Morley Safer probably thought his report on the blind-siding of Feuer was a shocking expose of an IRS action that turned fifty taxpayers into welfare cases. But the Feuer case is not a story in which an IRS agent has careened out of control or the bureaucracy has mistakenly made a seizure that is not cost-effective for the government. In fact, the IRS never makes calculations of whether closing down a firm will add or subtract from the Treasury's balance. The shutting down of Feuer Trucking was completely consistent with IRS policy. Perhaps Morley Safer thinks he has struck a mortal blow against the IRS by unveiling its tactics against Feuer Trucking. Instead, you should think of the report as an unpaid fifteen-minute commercial for the IRS, opportunely placed just after the week most folks got their W-2s in the mail and started to look their 1040s over. Morley Safer's message, intended or not, is this: The IRS is a law unto itself. Watch out!


Agents Who Go Creep in the Night

Everything the IRS did to Feuer is legal. The revenue officers of the IRS are among the most powerful people in government. Ten days after demanding payment the IRS can seize a taxpayer's house, car, land, or business for subsequent sale at public auction. They can serve a levy on a third party, such as a bank, an employer, or anyone who owes the taxpayer money. If they suspect you might skip town without paying they can seize right away. All of this can be done without a court order. And if they so desire they can file a Notice of Federal Tax Lien at the local courthouse, which freezes a taxpayer's titles to property and puts the IRS at the head of the line of creditors.

Impressive artillery. From the outside the IRS looks like an unbeatable army, with intelligence divisions scoping out your financial moves, crack troops of auditors probing your returns for weaknesses, and a corps of revenue officers winning the property battle by seizing houses, cars, and bank accounts. It should be no surprise that a great number of revenue officers have spent time in military service.

But from the inside the IRS is not the invincible force most people imagine. Fear and paranoia run from the national headquarters in Washington, D.C., to regional divisions and districts and finally down to the group managers who oversee the foot soldiers of collection - revenue officers. Group managers are berated and harassed by their bosses. They, in turn, berate and harass their revenue officers, who then pass their frustrations on to taxpayers.

It is highly unlikely that Donald Raftery, the revenue officer who shut down Feuer, got in hot water with his bosses. They probably toasted him with champagne. Besides generating all that good publicity for the IRS, Raftery racked up some marvelous statistics. He seized a bank account, tagged property, shut a business down, and closed the case. I guarantee that the Feuer case had been a thorn in the side of the local IRS office. Group managers hate over-age cases like the Feuer case. They have to regularly file reports on why they continue to carry them in their inventory and send those reports up the chain of command. This makes the chain of command very angry because an over-age case is not a nice clean statistic they can file to show what a good job they are doing - and what's worse is an over-age case implies that the network has gone soft. So the word goes out to close cases and build statistics. I swear that sometimes it seemed like there was an angry god in Washington who could only be appeased by a steady diet of closed cases. When offered cold cash in installments the god would turn up its nose, preferring the delicacy of stats.

This mania is pervasive in the IRS. One group manager who used to crack the whip over my head - I refer to him as Tricky Dicky in my more generous moments - invented his own statistic, the "Field Effectiveness Rate." He figured it by dividing the number of hours you spent in the field by the number of cases you closed. "Hey," Tricky Dicky growled at officers more than once, "you've got the most miserable Field Effectiveness Rate in the office! Probably in the world!" Tricky Dicky was always on everybody's back because he loved collecting statistics. I thought that arbitrarily seizing the property of out-of-luck businessmen to make Tricky look good was ridiculous. So, whenever I could, I arranged perfectly legal installment-payment agreements for delinquent taxpayers. While many group managers would have you believe there is no such thing, it is well within the rights of a taxpayer to set up such a deal. Similarly, it is possible to reach a compromise with the IRS, settling for as little as 10 cents on the dollar, just as you might with any other creditor. The IRS does its best to hide this option from citizens. By policy they must consider your offer of compromise, but to make this deal work you really need to know how the IRS works. I know of one IRS administrator in charge of offers in compromise who earned a promotion by automatically refusing every offer of compromise that hit his desk.

Not every taxpayer is treated equally by the IRS. Each group manager is allowed incredible latitude in interpreting the collection manual, a freedom that gives rise to cavalier and arbitrary methods of enforcement. It insults your sense of justice when your group manager commands you to seize the car of a guy who owes the government $150, while down the hall a different manager is okaying installment payments on a $20,000 case. You despair when you are working two cases in which both taxpayers can afford to pay only $100 a week, but the first fellow owes $5000 and is forced to pay, while the second fellow owes $25,000 and has his case declared uncollectible. The group manager's logic goes like this: The guy who owes $5000 will eventually be able to pay up and give us a closed-case statistic. But the guy who owes $25,000 will be paying until the year 2000 before we will be able to offer a closed-case statistic to the god in Washington. So the IRS declares the case uncollectible, which effectively means the guy will never have to pay up.

I seized a number of cars and houses in my day, but I am proud to say that I never shut down a business. I tried to work the IRS's policy options to the benefit of the taxpayer. I would set up installment payments, arrange compromises, or not submit cases to Tricky Dicky (who was demanding blood and seizures) for enforcement decisions until the taxpayer was in better financial health. Once I even transferred a case to another office where I knew the taxpayer would get a better break.

You shouldn't get the idea that I let everybody off the hook. I believed in collecting back taxes. I collected whenever I could, telling taxpayers what the IRS could do, not what it could not do. In one case, where a massage-parlor owner was seriously behind in his taxes, I inquired if he had any property he could sell or use to secure a loan to pay off the IRS. He volunteered that he and his wife owned a farm and that he would take out the loan as I requested. He was cooperating, so I wasn't going to tell him that, because he owned the farm jointly with his wife and the tax liability was his corporation's, the IRS had no legal right to seize his farm.


Being There

April may not be a good time to ask the average person to swallow a sympathetic profile of any IRS employee, let alone a revenue officer. But until the public finds out what it is like inside the IRS and how they treat not only the taxpayer, but their own employees, any reform of the system will be impossible.

The most common sort of collection case involves a small business, like Feuer Trucking, that has fallen behind in payment of withholding taxes. A revenue officer's inventory is brimming with eases like these. Day after day, revenue officers meet with hapless souls who are working sixty to eighty hours a week at businesses that are deeply in debt and dying. The revenue officer has long ago learned that his job is a dead end. No other part of the IRS wants him, and the only job he will ever be able to get in the private sector using his skills is as a bill collector, which pays $12,000, if that. Revenue officers learn better than anyone how tough it is to make a good living on the outside, and they become appreciative of their $13,000 - $30,000 a year salary. As for the shattered businessmen they must deal with daily, you could compare it to the philosophy of a mortician: "Their dying is my living.".

The system turns revenue officers into basket cases. Unlike most jobs, there is little camaraderie or socializing after hours. In one northern Virginia office, the only thing the officers have in common is a doctor who plies them with Valium for their nerves. Most of my coworkers treated their job like a prison sentence, counting down the years and days until retirement. I never met a revenue officer really happy with his job.

The job requires you to be the buffer between two desperate people - your group manager and the taxpayer. The taxpayer is desperate for the obvious reasons' but the group manager is desperate because he needs you to turn out the statistics he needs to please his superiors. The revenue officer may dislike the delinquent taxpayer, but he hates the group manager. The group manager has the power of life and death over the revenue officer's career. He can pile an overwhelming workload on you if he doesn't like you. He can go over your cases with a fine-toothed comb and write you up for the slightest violation of IRS policy. Some districts don't even give out collection manuals to their officers. The collection manual is thousands of pages of confusing instructions. Very little of it is law - most of it is IRS policy and operation procedure that is constantly being updated. Many group managers fear that if they hand it out revenue officers will "waste" time studying it and become too scrupulous in observing taxpayers' rights. Group managers like Tricky Dicky consider themselves the ultimate manual, anyway.

To build statistics, group managers need to drive their officers. They will walk around the office monitoring phone calls to taxpayers and chide officers if they aren't tough enough. They teach them to get the upper hand on taxpayers -"be firm, assertive, and commanding," they advise. Because making seizures is confrontational - taxpayers go nuts when you tow their cars away - many officers are reluctant to seize, especially the younger, inexperienced ones. I've seen group managers in need of seizure statistics boot young officers out the door, admonishing them not to come back without making a seizure.

In each group, there is at least one revenue officer who really enjoys putting the screws on taxpayers. I heard of one officer who was also a part-time security guard. He delighted in stowing his handcuffs and badge in his briefcase for taxpayers to see when he flipped it open. (Revenue officers do not carry handcuffs or badges, only identification credentials.) Another officer used to put the label "WARNING - U.S. GOVERNMENT SEIZURE" on case folders for taxpayers to see. All of us regularly implied to taxpayers that we would seize property if we didn't get the money owed-long before we had done title searches to see if we really could seize. And then there was the revenue officer who always began interviews with taxpayers by banging his fist on the table and shouting, while he stuck his pointed finger in their faces, "Now let's talk about that money you stole from the government!" Most of these gorillas get promoted to group manager.


Cracking the Monolith

Short of buying my book (excuse the plug), there are a variety of ways to avoid being victimized by the IRS. Nothing beats sound legal advice. But here are a few tactics taxpayers used successfully against me.

  • If a special agent reads you your rights at the beginning of an interview, demand to see your lawyer. The agent will terminate the interview.
  • If you're going into business (either alone or with partners), get good legal advice on how to shield your assets from the enforcement powers of the IRS and other creditors.
  • If you are already in business and want to shield your assets from the IRS, you must do it before incurring a tax liability. Otherwise the IRS can take you to court or nullify the transaction.
  • If you own a car you think the IRS might seize, you can legally sell it and then rent a car the IRS can't touch.
  • Don't believe it when the IRS threatens to seize everything you own. The law allows some automatic exemptions.
  • If you leave no paper trail of bank accounts and other transactions, the revenue officer will have a hard time tracing your property. What he can't find he can't seize.
  • Always inquire about filing an offer to compromise on taxes owed. If rejected, try again. Demand a written response.

Another time-honored way to beat the IRS is to yell like hell. Letters of complaint to a group manager's superiors can sometimes work wonders. The IRS is a reactive creature, vulnerable to criticism and the wrong sort of publicity. When the heat is on, it will often back off. One of the most chaotic periods for the IRS was during the Watergate period. The outrage over the discovery of Nixon's IRS "Enemies List" forced the IRS to pull in its horns for several years.

Writing your congressman can't hurt either, although you should know that the IRS is resilient enough to come back. Senator Carl Levin (D-Mich.) held hearings on abuses by revenue officers in 1980, culling damning testimony from officers from the Midwest. But no true reform came out of those hearings. When the Supreme Court handed down the GM Leasing decision in the mid-1970s, limiting the IRS's seizure powers, the commissioner of the IRS telexed out a command to cease and desist all seizures until IRS counsel could study the decision and come up with new policies. There were no seizures made for three months and today, as a result of those new policies, actual seizures of physical property have dropped from 25,000 annually to 10,000.

The need for lasting reform has never been greater. Because of the downturn in the economy the number of delinquencies has skyrocketed and the number of revenue officers is being increased by 50 percent. This will push the combined number of property seizures and levies against assets past last year's record-breaking total of 1,068,985. Reform should address specific administrative abuses. Here are my suggestions.

  • Congress should pass comprehensive legislation expanding the specific rights of taxpayers to protect them from IRS harassment and abuse.
  • Congress should give taxpayers the right to redress of grievances in cases of improper seizures or assessments.
  • The ten-day notice and demand required prior to seizure should be expanded to thirty days to allow a taxpayer to get his financial house in order and explore alternative means of covering his tax liability.
  • The IRS should simplify the revenue officer's collection manual. Presently the few pages of the U.S. Tax Code covering collections are translated into thousands of pages of policy and procedure in the manual, which, as we have seen, allows group managers and revenue officers to make their own law in the field.
  • IRS managers in the field should be forced to live up to official policy. Seizure of property should be the IRS's last resort after all other collection alternatives have been explored.
  • Today's low personal-property and business-property exemptions from seizures allow the IRS to shut down any business that falls behind in taxes. The tax code only allows a $1500 personal-property exemption and $1000 in tools-of-the-trade exemptions. Congress should increase total exemptions to $20,000.
  • The IRS should develop regulations specifying the conditions under which a levy or seizure will be made. Revenue officers should be required to inform taxpayers under what conditions seized property will be released.
  • The office of ombudsman in the IRS should be given teeth and should be filled by a non-IRS presidential appointee. Currently the ombudsman is a career IRS employee with an IRS mentality and is unable to look at issues from a taxpayer's perspective.
  • Lastly, the IRS should give Miranda-type warnings to taxpayers undergoing audits. It is possible for an audited taxpayer to reveal self-incriminating information about his returns, information that can be turned over to the criminal prosecutors of the IRS.

The IRS has unique powers over Americans that the CIA, NSA, FBI, and local police can only dream about. Protections against illegal search and seizure and against self-incrimination as well as reinforcement of the rights to counsel and redress of grievances, should be legislated to limit those powers. The fight to restrain the IRS will be a long one, but rewarding to anyone who takes pride in his liberty.

In 1979 I bid Tricky Dicky and the IRS adieu and went into business for myself. I like to think that writing books and articles like this will advance such a reform.

JACK W. WADE, JR., is the author of "When You Owe the IRS" (Macmillan) and a former IRS Revenue Officer. JACK SHAFER is managing editor of INQUIRY Magazine.

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