Thank you for the opportunity to be of service and to express my views on the current state of the Internal Revenue Service. I am a practicing tax attorney in a suburb of Los Angeles. For the past 20 years, my practice has been primarily limited to matters of tax collections, audits and tax litigation. I represent clients in all walks of life and in all tax brackets. I'm in the trenches everyday, eye-to-eye with IRS auditors and tax collectors.

One of the high points of my legal career was the obtaining of U.S. veterans recognition for the American Volunteer Group, commonly known as the Flying Tigers of World War II fame. I am the author of several books on IRS practice and procedure with emphasis on audit and collection practices of the IRS. I wrote the first practitioner's manuals on IRS and California collection defense practice. I have also written books for business and individual taxpayers who are having IRS problems. I frequently speak at major tax institutes throughout the country such as the NYU and USC Tax Institutes, Northwest Tax Institute and annual meetings of the American Society of Attorneys-Certified Public Accountants. I am continuously educating and writing for attorneys, CPAs and tax practitioners on IRS and California practice and procedure.

Most IRS tax collectors (Revenue Officers) are decent overworked people with an unpopular job. However, they do their utmost to follow the law and the provisions of the IRS Manual. Unfortunately, they do not keep current on changes within the IRS and very often their internal libraries are seriously outdated.

Recently, Revenue Officers have informed me that the IRS is adopting a get-tough attitude with regard to tax collections. While the first Taxpayer Bill of Rights of 1989 did away with the keeping of formal internal statistics on collection, it still appears that the only way to make a name for yourself within the Collection Division is by the number of seizures under your belt. The remainder of my testimony will address an unpleasant example of this which I have been involved with over the course of the past few months.

The IRS has fixed standards relating to allowable living expenses in order to grant the taxpayer a payment arrangement. A taxpayer has no fight to a payment arrangement. These standards are unrealistic and do not take into consideration financial commitments made by people prior to their becoming delinquent in their taxes.

The same unrealistic IRS standards apply to the cost of owning and operating a car and other essential living expenses such as food, clothing and personal maintenance. A taxpayer is not allowed educational expenses such as a child's private school or college education. A taxpayer is not allowed to support his or her place of worship.

These unrealistic expense standards have driven many taxpayers into unnecessary bankruptcy in order to take advantage of the automatic stay from IRS seizures and wage garnishments and to work out long-term payment plans, some available without interest. However, these otherwise productive taxpayers now have the stigma of bankruptcy on their record. My colleagues around the country have expressed the same frustrations. The driving of normally solvent and productive taxpayers into bankruptcy because of unrealistic IRS expense standards is a national tragedy.

The bottom line is the IRS would rather force a taxpayer into bankruptcy than to accept a fair payment arrangement or a settlement known as an offer in compromise.

The IRS can take a taxpayer's home on just the signature of the District Director alone. There is no court hearing, no notice and no opportunity to litigate the merits of the IRS' claim.

The IRS can close down a business and take away a taxpayer's livelihood by merely filing a few papers in federal court. The judge simply signs the seizure order and that's all there is to it. The taxpayer gets absolutely no notice or opportunity to contest the legality of the assessment or the amount the IRS claims is owed. In doing so, the IRS can commit perjury and get away with it. What is sad is this type of criminal conduct seems to be condoned by the tax collectors' superiors. To me, this violates not only the Fourth and Fifth Amendments of our Constitution, but one's basic civil rights as well, it's just plain not fair!

As an example, let me tell you about "Joe." Joe operates a small business. In the early 1990's he owed the IRS. Because he couldn't pay in full, he made a deal with the IRS known as an offer in compromise. This was accepted by the IRS on the condition that regular payments be made. The IRS claims Joe breached the terms of the deal; Joe claims he paid in full. The IRS did not send Joe the required default warning letter. This IRS error entitles Joe to have the offer reinstated. Since the beginning of the year, the IRS, through seizures and wage garnishments, has taken more than the terms of the original offer allowed. Although repeated requests have been made for a copy of the warning letter, to date it has not been produced.

For the past several years, Joe has been current on his filings and tax payments. When a taxpayer is current the IRS directives require that the IRS work with the taxpayer in suspending collection due to economic hardship or establishing an installment payment arrangement.

But Joe's assigned Revenue Officer does not want to discuss a hardship suspension or an installment payment arrangement. The Revenue Officer wants to close down Joe's business while Joe and his wife are barely able to provide an income to support their two children.

In order to obtain a court order to close down a business, all that is needed is a formal application and a sworn declaration that the revenue officer followed very specific procedures to protect a taxpayer's Constitutional rights. It's all very secretive. The taxpayer is never given notice of these proceedings and is never afforded an opportunity to contest the merits of the IRS' claim. The Revenue Officer simply obtains the seizure order through the Court, represented by the U.S. Attorney's Office and serves the final court order along with the seizure notice to the taxpayer who must immediately vacate the business premises. The taxpayer's only recourse is a long and costly tax refund procedure which most likely will wind up in court. In the meantime, the IRS sells the business assets and the taxpayer's business is gone!

One day I was negotiating a payment arrangement, and the very next day the Revenue Officer, without warning, showed up at Joe's place of business together with several IRS personnel and padlocked the entire premises. Two court orders were obtained against Joe personally and his wholly-owned corporation. Joe was not shown the court orders and the several attempts to request copies of the orders from the Revenue Officer and his supervisor went unanswered and still go unanswered!

Two court orders were finally obtained from the District Court Clerk. Both supporting Revenue Officer declarations revealed blatant perjury. The Revenue Officer represented to the Court that he met with Joe and asked his permission to enter and seize his business. It was on these representations that two District Court judges issued the seizure orders. Joe never met with the Revenue Officer. In fact, during that week, Joe was out of the state and never spoke to anyone from the IRS.

In obtaining perjured court orders, the IRS violated Joe's civil rights and rights under the Fourth and Fifth Amendments of the Constitution.

The IRS allowed Joe back in his business a few days later but not before Joe paid $6,400 which he had to borrow from friends, a most humiliating experience. Before handing Joe back the keys to his business, and dangling the keys in front of Joe's face, the seizing Revenue Officer, the fellow who committed the perjury, insisted that Joe revoke my power of attorney and sign a paper waiving his rights to complain about any IRS misconduct. Feeling helpless, Joe complied but under duress.

One week, the IRS told Joe he owed a little over $160,000. But, just three weeks later, Joe was told he owes close to $314,000 -- with no explanation.

Some IRS auditors and tax collectors have taken the position that the Congressional directives set forth as statutes in the Internal Revenue Code are simply guidelines that are free to be rejected at will. If IRS employees do not follow the law and if they commit perjury before federal judges, their conduct is often condoned by their superiors, including those at the highest level.

With increasing frequency, I find that I have to go over the Revenue Officer's head to his or her manager and even over the manager's head to the Branch Chief. It is getting increasingly more difficult to distinguish ignorance from bully tactics and overzealousness. I do believe that Revenue Officers are being pushed by their superiors to undertake more seizures in order to achieve promotions within the system.

The example I have presented here today reflect a lack of accountability within the system, to the taxpayer, and to the taxpaying public and reflect an institutional arrogance. This is especially true in exceptional cases where a maverick or renegade tax collector throws aside the law and internal IRS procedures in order to achieve self-promotion and recognition by his or her superiors.

Suggestions for Improvement of IRS Service and Taxpayer Rights

I.R.S. stands for Internal Revenue SERVICE. We're not getting as much service as we should for our money these days. Taxpayer abuse will not stop by just putting in a new high tech computer system. While electronic technology is very important and necessary, we must keep in mind that these are just machines and machines can serve to further widen the distance and alienate the American people from their Government. Creating a new Board of Governors that sits in its insulated ivory towers is not the answer either.

We need to put some real teeth into the Taxpayer Bill of Rights. Of primary importance, the IRS should not be allowed to take any property of any kind from a taxpayer without notice and an opportunity to be heard. The IRS should pay damages not only when its agents violate the statutes in the Internal Revenue Code, but should also pay damages for violating internal procedures set forth in their own Manuals. Punitive damages should also be awarded to taxpayers whose rights have been violated.

A taxpayer should be allowed a change of IRS auditor or collector for reasonable cause.

What is needed is an external check and balance system; a forum where small business owners and the American taxpayer can afford to be heard without first having to pay what the IRS says is owed and where all collection activity must immediately stop until the issue is heard and ruled upon. What is needed is a forum where the burden of proof is shifted to the IRS instead of the way things are now where the taxpayer is presumed guilty until proven innocent. This forum must not be part of the IRS.

May I respectfully suggest the institution of an independent administrative system of review of IRS collection activities before they are allowed to be implemented. A taxpayer should be allowed to appeal IRS action to an Administrative Law Judge and, if necessary, appeal that Judge's decision to an Administrative Appeals Board.

Conclusion

In conclusion, let me make it clear that not all taxpayers who owe the IRS deserve a kinder and gentler hand. Some of these people need a fist.

Some do not take their tax obligations seriously, but most people do. Most Americans want to do the right thing by the IRS and get back on track. The IRS should not be abolished, but the machine definitely needs a tune-up. Taxpayers deserving respect must be treated with respect; they must be given a level playing field. Our laws, our courts and our Constitution must have the highest level of respect.

On this date in 1779, a Scottish born American commanded an old French ship he renamed the Bon Homme Richard in honor of Ben Franklin. He got into quite a fight and was out-gunned by a larger British ship known as the Serapis. When the British captain asked him to surrender, he replied, "Sir, I have not yet begun to fight." That man was John Paul Jones, the Father of the American Navy. Ladies and gentlemen of the Senate, you must show the American people that you, too, have not yet begun to fight!

Thank you for this opportunity to appear before you.