Mr. Chairman, my name is Earl Epstein. I am a practicing lawyer and a member of a small law firm in Philadelphia, Pennsylvania. I appreciate the invitation to testify before this Committee.

For the past 35 years I have been engaged in the private practice of tax law and during that period of time have represented numerous taxpayers before the Internal Revenue Service. Of particular importance today is my experience in representing taxpayers who have been subject to collection proceedings by the Collection Division of the Internal Revenue Service.

As I am sure you are aware, the stated "Mission" of the Internal Revenue Service is "�to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our products and services; and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency, and fairness." The Services' "Statement of Principles" goes on to say that administration should be conducted " with great courtesy and considerateness�should never try to overreach, and should be reasonable within the bounds of law and sound administration." These statements of principle are well publicized and can be found posted in Internal Revenue Service waiting rooms around the country. Unfortunately, taxpayers and their advocates have not always found these principles to be followed with any degree of consistency by the Collection Division.

By these remarks I do not mean to suggest that all Internal Revenue Service Agents harass taxpayers, nor do I mean to suggest that all lie or overreach. Indeed, most IRS personnel that I have dealt with over the years are hardworking, honest people who give their best efforts to administer a confusing and difficult system in a fair and honorable manner. However, it is also clear to me that harassment and overreaching by the Collection Division of the Internal Revenue Service is far from isolated and that, indeed, it could not continue at the rate that I have seen over the years without institutional approval of these practices, whether that be an active approach or by passive approval.

Following your hearings on abuses of the Internal Revenue Service last year I was somewhat chagrined at the contention of the Service that reports of their misbehavior were "exaggerated examples of rare instances of inappropriate actions." This has not been my experience with the Collection Division. In that context I would like to relate to you just a few examples of the kind of unfortunate experiences which I have faced in my years of practice before the Collection Division of the Internal Revenue Service:

Just a few months ago the Internal Revenue Service filed a lien against a joint bank account held by a husband and wife as tenants by the entireties. The debt for taxes, however, was only that of the husband. Under Tennessee state law, which applies in this instance, the lien is improper and may only be filed against the survivorship interest of the husband, not the present interest of the wife in the joint account. The controlling case issued by the Tennessee Supreme Court was cited to the Collection Division in Memphis. Nevertheless they refused to release the lien, thereby placing a hold on the funds of the wife, my client, which she sorely needed to feed her children. Short of litigation, which was not economically feasible in this instance, nothing could be done to persuade the collection people in Memphis to release the lien.

About two years ago a Collection Agent, attempting to collect unpaid withholding tax, told my client that he could pay the tax by a check from the attorney representing him at that time and that, if he would do so, he would receive credit against his personal withholding tax liability. After the payment was made as directed, the Collection Agent instead credited the payment to the corporate debt, rather than the personal liability of the taxpayer. When I later brought this matter to the attention of the agent, he denied his promise to credit the personal liability and then, when I confronted him with his oral agreement, he laughed and told me that "it wasn't in writing." This forced my client to pay an additional $30,000 in tax with no recourse under the law.

A few years ago a Collection Agent appeared in my office and told my secretary that he wanted to consult with me on a personal matter. When I invited him into my office he proceeded to identify himself as an agent of the Collection Division of the Internal Revenue Service and demanded access to my files on one of my clients, a clear violation of the attorney client privilege and clearly not a consultation on a "personal matter." When I asked him why he had lied to my secretary he merely laughed and told me that "sometimes we have to do that." Of course, I threw him out of my office and wrote to the Commissioner of Internal Revenue to report his action. I was later advised by the office of the Commissioner of Internal Revenue that the Agent received an unspecified disciplinary action.

Some years ago I represented a woman who owned and operated a small beauty shop. The Collection Division had placed a lien on her shop for unpaid taxes of approximately $175 and proceeded to sell her shop equipment at auction, thereby putting her out of business and embarrassing her in front of her customers and friends. At the auction she had displayed to the Collection Agent her canceled check with which she had paid the claimed tax. The agent refused to listen to her and proceeded with the sale. Subsequently I was retained as her counsel. I obtained copies of the computer records of her account from the Internal Revenue Service and was able to show how they had made an erroneous double entry of the tax due on their computer system, thereby making it seem that the taxpayer owed tax when, in fact, this was not the case. Although the Service acknowledged the error to me, they refused to make any effort to make my client whole, even refusing to repay the excess tax which they had collected by the sale of her property on the grounds that the Statute of Limitations had expired on the refund. Since the amount did not justify the expense of a refund action in the United States District Court, and since the law at that time did not permit an award of damages, there was little I could do for her other than to write to her Congressman to describe to him what had occurred. As a result of that letter a private bill was introduced in the House of Representatives which would have permitted her to bring an action against the United States for damages in order to compensate her for her loss. Unfortunately, the bill died in committee. She was never compensated and never received an apology. Her only solace was her ability to display the draft of House Bill to her friends.

For years a particular Collection Agent in Philadelphia lied to me repeatedly on a number of cases. In order to protect the guilty I will refer to him as Agent "M". I reported his actions to his supervisor on each occasion. On at least one case he was thereafter removed from the case and another agent assigned. Nevertheless Agent "M" appeared again and again on cases I was handling and was obviously never sufficiently reprimanded or dismissed for his conduct.

Some years ago I represented a taxpayer who had been severely harassed by the Government over a period of some ten years, first by bringing two criminal actions against him, both of which were dismissed by the Court, and then bringing a civil action against him alleging income tax fraud, to collect tax on the very allegations which were the subject of the dismissed criminal suits. The matter was brought to the United States Tax Court.

In an effort to settle the Tax Court case we submitted an Offer in Compromise along with the required statement of assets and liabilities, executed under penalties of perjury. Our friend, Agent "M" then instituted a criminal investigation against my client but refused to tell me why he had done so, or on what grounds he felt a crime had been committed. In a hearing to quash a subpoena issued against my client a Judge of the United States District Court in Philadelphia forced Agent "M" to disclose the grounds of the criminal investigation. It turned out that Agent "M" had decided on his own that my client had failed to list a number of stocks on the Offer in Compromise submission and therefore proceeded to push the criminal investigation for lying under oath on the Offer form. When informed of the grounds of his investigation I was able to easily produce the stock certificates in the name of my client as custodian for his children under the Uniform Gifts to Minors Act, thereby showing that my client had no legal right to the stocks and did not own them. As a result, my client had not lied under oath on the Offer in Compromise submission. Agent "M" had no compunction about harassing my client on false grounds which could have been easily explained had he been forthright and open in his dealings with me. My client, of course, had to bear the cost of these proceedings.

During the course of the previously described hearing in the District Court, Judge Norma Shapiro Court ordered Agent "M" to cease all efforts at collection and investigation and specifically forbade the agent from any contact with the taxpayer or his family pending a ruling by the Court on the validity of the claim which, of course, she later determined to be invalid. Blatantly ignoring the order of the Court, Agent "M" visited the home of the taxpayer's 80 year old mother at five AM the next morning, threatened her, and demanded entrance to search her garage. When the Court was advised of his actions Judge Shapiro severely reprimanded Agent "M" in open court.

When the civil fraud case was eventually tried in the United States Tax Court, the Court found for the taxpayer and criticized the Internal Revenue Service, stating that the actions of the Government could well have been viewed as a personal vendetta against him. But, of course, that criticism, although welcomed by the taxpayer, did nothing to repair the damage that years of harassment caused him, nor did it compensate him for the cost of two criminal trials, one suppression hearing, and a Tax Court trial.

⁽¹⁾ In 1977 the Congress amended the Consumer Credit Protection Act to include a new section known as the "Fair Debt Collection Practices Act." ⁽²⁾ That Act provides for a standard of conduct for debt collectors of "consumer debt", is designed to prevent "abusive, deceptive, and unfair debt collection practices�" ⁽³⁾ and provides for civil penalties and damages for violation of the Act. ⁽⁴⁾ Among other things it regulates the kind and place of communications with the debtor ⁽⁵⁾, defines and prohibits false or misleading representations ⁽⁶⁾, and defines and prohibits unfair practices ⁽⁷⁾. Unfortunately, the Act does not cover actions by an officer or employee of the United States to the extent that collecting any debt is in the performance of his official duties. ⁽⁸⁾ This exclusion is unfortunate in that, by implication, it permits an employee of the Internal Revenue Service to engage in "abusive, deceptive and unfair debt collection practices" that is prohibited in the private sector.

I would urge this Committee to give careful consideration to legislation making the Internal Revenue Service subject to the same rules of conduct which the Congress has imposed on the private sector, an interesting sidelight of which is a requirement of annual reports to the Congress assessing the extent to which compliance is being achieved. ⁽⁹⁾

1. You may read the report of that affair, and the opinion of the Court in Apothaker v. Commissioner, T.C. Memo 1985-445.

2. Public Law 95-109, 95^th Congress; 15 USC � 1692 et. seq.

3. 15 USC �1692(a)

4. 15 USC � 1692k

5. 15 USC � 1692c

6. 15 USC � 1692e

7. 15 USC � 1692f

8. 15 USC � 1692a(6)(C)

9. 15 USC � 1692m