Mr. Chairman, I thank you for the opportunity to appear before you and this Committee
today. I have spent the last 25 years either working for the Internal Revenue Service
Collection Division or representing taxpayers before the IRS Collection Division. I have
collected taxes from thousands of taxpayers and I have also represented hundreds of
taxpayers with tax problems. It is my sincere hope that my testimony today will serve to
improve the operation of the IRS for the benefit of the taxpaying public.
The Internal Revenue Code does not abuse taxpayers. A complicated tax code may result
in some unfair taxation, but rarely is it the cause of abuse. Long multi-page tax forms
also do not in themselves cause abuse. Frustration maybe, but not abuse. Even an audit.
while certainly stressful should not result in taxpayer abuse.
What then has caused the outcry of American citizens about abuse from the IRS, and the
plethora of media reports of the heavy hand used by the IRS?
Abuse of the taxpaying public occurs when the IRS improperly, and sometimes illegally,
uses its vast power in the process of implementing some type of enforcement of the tax
laws. Enforcement is the levy of a paycheck or bank account, the seizure of a car, or
home, or business. It can also result in the forced liquidation of a taxpayer's life
savings, IRA, or retirement account.
There is only one small part of the IRS that implements all of these types of
enforcement -- the IRS Collection Division. The Collection Division is charged with the
collection of unpaid taxes and securing unfiled delinquent tax returns. The Collection
Division serves wage and bank levies, files tax liens, seizes cars, homes and businesses
to enforce the collection of unpaid taxes. The Collection Division takes literally
hundreds of enforcement actions every day! Yes, hundreds of these actions against
taxpayers every day. It is the Collection Division of the IRS that is responsible for the
overwhelming majority of IRS enforcement actions.
Enforced collection of unpaid taxes is a necessity. As a result, the danger of taxpayer
abuse is both inherent and inevitable. Many taxpayers will feel they have been abused
simply because they do not like the fact that they are being compelled to pay their fair
share. We understand that "comes with the territory" when enforced collection of
taxes is part of one's every day job. So how does one ferret out the true cases of
taxpayer abuse? The answer to that question is the important issue to be addressed.
First of all, does the IRS correct abuses when they become aware of them? Often times,
they do. However, the more important question is, does the IRS cover up occurrences of
abuse? The answer is, yes! If the true number of incidences of taxpayer abuse were ever
known, the public would be appalled. If the public also ever knew the number of abuses
"covered up" by the IRS, there could be a tax revolt.
Why do we not know of these "covered up" abuses? The answer is simple. The
IRS protects itself by management support of employee actions whether those actions are
right or wrong. This acceptance of abusive actions by management is the root cause of
taxpayer abuse.
As I mentioned earlier, the initial cause of taxpayer abuse is IRS employees who
actually implement enforcement actions, many of which are approved by management in
advance. The enforcement may be necessary, however, it is the improper, or sometimes
illegal, enforcement that causes unnecessary abuse. Sadly, some employees repeatedly do
not follow proper collection policies and procedures and thereby repeatedly abuse
taxpayers. There are several reasons why this occurs:
1. IRS tax collectors, Revenue Officers, but more importantly managers, are not
properly trained in IRS policies and Internal Revenue Manual (IRM) procedures.
2. Revenue Officers, but more importantly managers, often respond that IRM policies and
procedures are "guidelines" only and do not carry the force of law.
3. When management condones the abuse, the Revenue Officer believes the mistake is
acceptable and is free to repeat the error again.
4. Revenue Officers learn the general perception from management that most tax debtors
are trying to cheat the government, are crooks or flakes, and generally not willing to pay
their fair share of taxes.
5. Revenue Officers capitalize on the taxpayer's inherent fear of the IRS and the
intimidation that they can inflict on taxpayers without any consequences for their
improper enforcement.
6. Revenue Officers, often with management approval, use enforcement to
"punish" taxpayers instead of trying to collect the most money for the
government.
There is an IRS policy statement on Collecting Principles P-5-2 #7, which is the most
often ignored. In part, it states: "We should help taxpayers who try to comply with
the law, and take appropriate enforcement actions when taxpayers resist complying. Good
judgement is needed in selecting the appropriate collecting tool."
If this one policy statement were properly applied, it would eliminate almost all
taxpayer abuse. But it is IRS management that must lead the way.
The most important factor in all of the foregoing information is that occasional
frontline employee errors in judgement, violations of the Internal Revenue Manual and lack
of understanding of policy statements are to be expected. However, what is not acceptable
is frontline management support of these mistakes. What is unconscionable is upper
management's support or tolerance of frontline management errors. The bottom line is that
the abuse of taxpayers by the IRS is most often caused by the Collection Division -- and
the problem with the Collection Division is mismanagement.
The following are some general scenarios of Internal Revenue Manual violations and
taxpayer abuse that I have personally encountered:
1. On far too many occasions, when a taxpayer fails or forgets to supply one or two
items on a long list requested by the Revenue Officer, the Officer's response is the heavy
hammer of a paycheck or bank levy.
2. Even when a taxpayer is represented by a Power of Attorney, the Power of Attorney is
quite often treated more aggressively than the taxpayer. Revenue Officers generally learn
from management the perception that most Powers of Attorney intentionally try to delay the
resolution of a case. This attitude is what causes the greatest animosity between the tax
representation community and the IRS. Disregarding the policy statement that I read to you
earlier results in damaging the credibility of the IRS and the integrity of the Revenue
Officer.
3. Quite often, the Revenue Officer finds a specious reason to serve levies on the very
source of income or assets that the taxpayer disclosed to the IRS. Again, this only serves
to undermine the credibility and integrity of the IRS. It is no wonder that the taxpaying
public has an aversion to providing any information to the IRS. It is an aversion created
by the IRS' repeated misuse of information provided to them by the cooperative taxpayer.
4. When a levy is served prematurely, even when the IRS admits that the levy was
improperly served, the routine IRS response is that when the taxpayer provides additional
information, the IRS will "consider" releasing the levy. When the information is
provided, the IRS adds insult to injury by not releasing the levy. The IRS cannot seem to
grasp the concept that when it makes a mistake, it should reverse the error immediately,
no matter what the consequence to the IRS.
5. Revenue Officers routinely violate the relationship with the Power of Attorney by
contacting the taxpayer directly. It is also a common practice of Revenue Officers and
frontline managers to try to intimidate a Power of Attorney into thinking that the IRS has
a right, false though it may be, to interview the taxpayer personally.
6. I have heard of Revenue Officers trying to discourage taxpayers from hiring
representatives and making disparaging, and slanderous statements about representatives.
Many taxpayer representatives know IRS collection procedures better than the Revenue
Officers. In many instances I have heard and experienced more harsh treatment of
representatives simply because the taxpayer's representative was former IRS.
7. The Internal Revenue Manual states that, "...reasonable necessary living
expenses are always allowed." However, on more than one occasion I have seen the IRS
punish a taxpayer by not allowing reasonable necessary living expenses, even current tax
payments. Why? Because the Revenue Officer and the manager did not think the taxpayer
obeyed their commands appropriately and simply felt that the taxpayer could somehow
survive without reasonable necessary living expenses.
8. A Revenue Officer, with IRS District Counsel concurrence, can serve what are termed,
"nominee" liens and levies, against third parties whom the IRS
"believes" are in possession of assets belonging to the taxpayer. The IRS is not
required to provide documentation to the taxpayer. The IRS is not required to provide
documentation to the taxpayer or the third party supporting the basis of their
"beliefs." The IRS basically has the attitude "Sue us to prove that we are
wrong."
9. I have witnessed Collection Division Branch Chiefs, Assistant Division Chiefs,
Division Chiefs, Problem Resolution (PRO) employees, and even an Assistant District
Director, violate or ignore Internal Revenue Manual procedures and Treasury regulations
simply because they wanted to punish a taxpayer.
I have seen more violations of IRS procedures and policies than I can count. The most
appalling aspect of the foregoing examples is that in almost every instance, IRS
management supported the erroneous actions of the Revenue Officer.
The Problem Resolution Office (PRO) is responsible for protecting the taxpayer from IRS
abuse. But having appealed many taxpayer abuses to the PRO, I have found them to be
utterly useless. PRO employees are typically Revenue Officers who came from Collection
Division and who may very well return to the Collection Division after spending some time
in the PRO. The PRO employees must depend on their evaluations and promotions from the
same Collection Division management which they are required to police while assigned to
the PRO. If the public thinks that the PRO is being objective in assisting with abuse
cases, the public is being hoodwinked!
What are the solutions to end this suffering of repeated abuses that I have just
outlined? I have two basic answers.
First, require the IRS to follow its Internal Revenue Manual as though it were law. The
IRS should be required to follow the manual to the letter. Taxpayers are required to
follow complicated tax return instructions, so why shouldn't the IRS be required to follow
their own procedures?
Second, make the IRS and management responsible for violations of Manual procedures. By
that I do not mean holding frontline employees responsible for accidental or unintentional
mistakes. However, when upper management condones the violations which bring great
detriment to taxpayers, then management should be held personally responsible.
As only one taxpayer representative out of thousands across the country, I have seen
dozens of taxpayers severely damaged, even made homeless, by the IRS Collections Division.
The true bottom line solution to resolving taxpayer abuses is IRS frontline management.
Restitution by an administrative claim as opposed to court action for erroneous or
improper actions would be a giant step in the right direction, but who will decide when an
action is improper?
If left in the hands of the IRS, you will have an IRS proud of the fact that they paid
out a minimal amount of restitution funds over the course of the year.
The culture of the IRS must change and it will not change on its own!
Thank you