GOV:Lets stop IRS Taxpayer Abuse NOW! by Sen. David Pryor This article was taken from the October 1988 Reader's Digest, Titled "Let's Halt IRS Taxpayer Abuse Now", page 146. Let's Halt IRS Taxpayer Abuse Now by: Senator David Pryor In San Francisco, retired postal worker Don Thurow thought he had mailed his monthly $1300 martagage payment to the California Federal Savings and Loan Association. But the check wound up in the IRS Service Center in Fresno, where the sealed envelope was opened, the words "INTERNAL REVENUE SERVICE" stamped over the payee in bold black letters and the money deposited into the United States Treasury. The IRS, which claims the post office accidentally delivered the letter to its doorstep, simply took Thurow's money. The IRS subsequently claimed that he owed about $300 in back taxes, although he had received no notice of deficiency and certainly no warning that his check would be seized and altered. "Altering a check is illegal," notes Montie S. Day, Thurow's lawyer. In Bedford, Mass., insurance salesman John Owings switched accountants and, in the process, missed remitting a quarterly tax payment. His new accountant noticed the mistake when completing Owing's 1986 return, and sent in the $3100 tax owed, followed shortly by the interest and penalties. The IRS misapplied the payment to Owing's 1987 taxes. He notified the IRS of its error, but that didn't stop numerous dunning notices. He was assured repeatedly - often in writing - that the problem was being corrected. But when Owings returned from a two-week vacation, he was shocked to find that the IRS had seized $2600 from his bank account. "We spoke with over 30 people at the IRS," Owings recalls. "We had people laugh at us." Only after getting his Senator to intercede did he get his money back and a written letter of apology. Las Vegas motel manager Joan Kilburn had her salary attached and a lien placed on her house because the IRS was trying to recover $92,000 in back taxes allegedly owed by her ex-husband. But Kilburn bad not been married to him when he incurred the liability. Only after Kilburn hired a tax consultant did the IRS remove the levy on her salary. It took the agency almost a year to finally withdraw the lien on her home. Some of the horror stories are simply a result of putting the IRS computer on auto-pilot, seizing any bank account connected to a delinquent taxpayer. For example, the IRS confiscated $694 in savings from a ten-year old San Jose, California girl who had earned the money collecting aluminum cans and performing household chores. Her employed father couldn't pay $1,000 in back taxes, and his name was also on her account. But that public-relations disaster didn't stop the IRS from placing a lien on three savings accounts totaling $173 and belonging to the childred of an Oregon farmer who had just been forced to sell his farm and equipment to pay debts. In recent years a startling pattern of IRS abuse and overzealousness has emerged from coast to coast. Hearings by the Senate Finance Subcommittee on Internal Revenue Service Oversight, which I chair, have demonstrated clearly that in the agency's effort to raise revenues and snare tax cheats, honest taxpayers and being abused. The IRS can seize a person's property or garnishee his income just ten days after its offical notice that a tax is due - even if the taxpayer disputes the assessment. A judgment or court order is not required. Once the IRS has seized property, there is presently no formal process to appeal a wrongful collection action. In the past eight years, the number of IRS liens on property owners has gone from 371,000 to 837,000. Salary levies have been upped almost fivefold - from 465,000 to 2.1 million annually. Moreover, liens are imposed on property having a value far greater than the tax delinquency - and often remain even after the debt has been paid off. SEIZURE FEVER. Contrary to offical policy statements, the IRS operates on a quota system. Witness after witness told our subcommittee that revenue agents must "produce" revenue - and those who crack down on taxpayers the hardest advance the fastest. Beverly Ardis was an IRS employee in New York State for 12 years. But when she tried to correct a $500 double assessment caused by an IRS auditing error, she says she was told, "If the taxpayer is stupid enough to sign for it, you assess it." Ardis says it was also explained to her that if the quota for closing cases was not met, the district director would not get a merit-pay bonus. Ardis got the matter corrected by going to the agency's internal inspection service. Thereafter she felt she was being harassed as a trouble-maker. "I was audited," she says. "My co-workers were questioned about my personal life, about my wearing apparel, about my lunch-time reading habits." Ardis asserts that a doctor eventally advised her to resign because the work environment was adversely affecting her health. In Southern California, revenue officer John Pepping testified that one IRS branch chief in his district frequently gave extra leave time to the employees who had collected the most money on a weekly basis. A group manager had a sign hanging in his office that read "Seizure Fever - Catch it!" Quotas are only the top of the iceberg. Official policy calls for revenue officers to consider all other means of collection before attaching liens and grabbing property. But many IRS branch offices systematically violate this instruction. In Detroit, superiors gave revenue officers case files bearing the instructions "This is a seizure" or "First action: levy." In Las Vegas a group manager directed his troops: "When to seize? As soon as possible after demand has been made and not resulted in payment." This overzealous attitude leads to outrageous abuse. In Pipersville, PA., the IRS notified Thomas L. Treadway, owner of a successful trash-management business, that he owed the government $247,000 - and started seizing his assets the very same day. Claiming that Treadway was diverting assets to his friend and companion, Shirley Lojeski, revenue officer George Jessup also seized $22,000 from HER bank account and put a lien on her horse farm. There was absolutely no evidence to support that charge. But the siezure made it impossible for Lojeski to buy feed for her horses, and she was threatened with foreclosure when she did not make her mortgage payments. Two months later, an IRS appeals officer found the entire $247,000 assessment against Treadway unreasonable. But Lojeski had to sue in federal court to have the lien removed. Even after the judge ruled in her favor it took the IRS four months to act. Meanwhile, she and Treadway lost $75,000 in legal and accounting fees. Lojeski tried to collect damages, but a federal court ruled that the IRS manual established only internal procedures, not a due-process standard. In other words, just because an IRS manual lists taxpayer protections, that doesn't mean taxpayers have any substantive rights. WHAT HAPPENS TO FAIRNESS? According to IRS policy, taxpayers who fall behind in their payments should be given an opportunity to pay off their debts in a reasonable fashion. But, testified revenue officer Joe Boyd of St. Louis, "installment pay plans for delinquent small businesses are discouraged as being too time-consuming." Maurice Bishop, a businessman from Benton Harbor, Michigan, accrued a $40,000 tax indebtedness after he employed a manager who failed to pay witholding taxes. The IRS put a lien of $400,000 on Bishop's property - virtually everything he owned - for a debt one-tenth that amount. Even when he managed to pay off half his indebtedness, the IRS failed to discharge any of its liens, and when he paid the balance, it took the IRS two months to discharge the liens. All too often, the IRS exhibits what can only be described as a bully mentality. Former IRS revenue officer Jack Warren Wade, Jr., testified that a struggling New York model called revenue officer Kevin Koscs to say she was too scared to come into the office, but that she had hired someone to represent her, as permitted under IRS regulations. She added that the financial statement the IRS had requested was already in the mail. The officer unilaterally wiped out her bank account to punish her for not appearing in person at the office. "The IRS many times is tough and right, but rarely is it fair," says former IRS revenue officer Joseph B. Smith, Jr. "It has lost its sensitivity to the human condition, thinking of taxpayers merely as a series of Social Security Numbers rather than as real people with dignity and value." "From out in the country," says Sen. Bill Armstrong (R., Colo.), "the IRS looks like the Gestapo." Is Senator Armstrong exaggerating? In November 1984, seven or eight IRS agents raided the Engleworld day-care center in Allen Park, Michigan, which owed $14,000 in back taxes. The IRS agents placed the children, ranging in age from 18 months to ten years, in two rooms. The also put tables at the doors leading to the rooms, and parents who owed money to the day-care center were asked either to pay the IRS or to sign promissory notes before picking up their children. "They were using the children as collateral," said one mother of a seven-year-old at Engleworld. "It was like something out of a police state." To give Americans a fighting chance in dealing with the IRS, Sen. Harry Reid (D., Nevada), Sen Charles E. Grassley (R., Iowa), Rep. Robin Tallon (D., S.C.), and I have introduced legislation we call the Taxpayers' Bill of Rights (S. 1774). Its major provisions would: * Prohibit the IRS from basing employee performance evaluations on dollars collected or seizures made, and enable taxpayers to sue the agency for damages, as well as for repayment of legal and accounting fees if the IRS took unreasonable action against them. * Increase the taxpayers payment time from ten to 30 days before a dusputed levy or seizure is impsed, and require the IRS to offer an installment plan for debts of less than $20,000. * Compell the IRS to issue a written list of taxpayers' rights during an audit, and empower an ombudsman to issue "Taxpayer assistance order" in conflicts between revenue agents and taxpayers. Contact your Representative and Senators to see if they support the Taxpayer's Bill of Rights. Its enactment will mean that honest taxpayers can no longer be hounded and harassed by the IRS. Says Sen. Malcolm Wallop (R., Wyo.), one of the bill's 71 co-sponsers: "If Americans must work the first four months of the year simply to meet their tax abligations, the least Congress can do is see to it that their rights are protected."