The California Collection/TheCaliforniaCollection.cdr/his097/irsabuse.lzh/IRSABUSE.TXT

Text File | 1991-09-14 | 11KB | 200 lines

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."