Wednesday, January 12, 2011
THE NEED FOR IRS OVERSIGHT BY THE SENATE FINANCE COMMITTEE AND THE WAYS AND MEANS SUB COMMITTEE ON OVERSIGHT The Senate Finance Committee conducted IRS misconduct hearings in 1997. The Committee on Ways and Means has not held IRS misconduct hearings to consider the IRS abuse issues. My general observation is that in too many cases, the IRS does not live up to its Mission Statement to apply the tax law with integrity and fairness. Even stronger, I am a witness to IRS abuses of power, abuses of discretion and misapplication of law. I am a tax attorney with an IRS “controversies” tax practice. I only deal with active issues pending before the IRS - IRS collection issues, civil and criminal examination, interpretative issues, tax settlements and multiple other IRS administrative issues. Since I had a full 27 year career in the Office of the IRS Chief Counsel I have unique insight into the administrative practices of the IRS. Congress needs to take a closer look at the IRS and its bureaucracy. I believe that its management is bloated. There are too many managers who spend most of their time writing reports for the reports of their manager. On the other hand, the lower levy IRS employees are not well trained in too many instances. The technical work is lateral without an effective technical management. The IRS administers tax law. The bottom level employees and most of their managers are not lawyers. Therefore, when there is a technical issue, they are making decisions without the technical skill and background to make those decisions. I wrote comment yesterday @ustaxattorny critical of the office of the National Taxpayer Advocate who largely ignores her legislative mandate under section 7811 to issue Taxpayer Assistance Orders to stop taxpayer hardship from IRS abusive collection actions (e.g., taking income needed for rent). With some legislative thresholds, it is possible for Congress eliminate the huge bureaucracy that constitutes the office of the Taxpayer Advocate and save a money by the elimination of that office and its administrative structure. Why keep that organization if it largely ignores its legislative mandate to help taxpayers in hardship situations when legislative thresholds can prevent IRS abuses? Also, if Congress is going to consider tax reform or tax simplification in this session, it needs to consider the role of the IRS. It is easier to argue for tax reform and tax simplification from a platform of data that identifies the extent to which the IRS is not an effective organization and is deficient in its administration of the current tax code. As an example of an IRS abuse, the IRS often levies income without taking into account whether the taxpayer is left with money for food, housing, transportation and other necessary expenses. Under section 6343(a)(2)(D) of the IRS Code, the IRS is prohibited from any levy that creates an “economic hardship.” Section 301.6342-1(b)(4)(i) of the Income Tax Regulations states the general rule that a levy creates an “economic hardship” if the levy, “in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses.” The IRS tax lien and tax levy practices that serve no purpose other than cause economic damage to individual and business taxpayers even in situations where the tax liens and tax levies have the effect of decreasing tax revenue and, correspondingly, increase the Tax Gap. In many instances, IRS tax levies of salaries of taxpayers and gross income of businesses reduce the collection of tax revenue, destroy small businesses, cause the loss of jobs, and reduce tax compliance. IRS tax liens also reduce tax revenue, destroy small businesses, cause the loss of jobs and reduce tax compliance. The office of the National Taxpayer Advocate is loathe to issue the Taxpayer Assistance Orders to correct this kind of abuse of power. The bottom line is that the IRS engages in practices that lose revenue and are completely counterproductive. This is the reason that IRS oversight hearings are necessary. Congress needs to collect testimony from the tax community and from tax practitioners like myself. If the taxpayer complaints to members of Congress are saved, organized by issue, and uploaded into a permanent data base, the Congress would have important data to provide needed IRS “transparency” and result in more effective IRS oversight. Data is necessary to identify IRS positions that have a negative impact on the economy and the collection of tax revenue. It is fair to say that every member of Congress gets complaints about the IRS regularly. Constituents complain about IRS abuses of power, IRS misconduct, erroneous applications of law, and hardship. This data is not saved; it becomes wasted data. The complaint traffic to the NTA is also wasted data. There is no national data base for IRS complaints. Obviously, the IRS will be hesitant to be aggressive on any tax matter with any taxpayer if their actions are transparent to the public, to the media, and to Congress. I have formed a start-up organization, www.irsforum.org with the sole purpose of collecting taxpayer complaints about the IRS. The IRS Forum has been approved as a 501(c)(3) educational organization. Although members of Congress receive large amounts of IRS complaint traffic, that data is largely wasted because it is not aggregated into a data base. The IRS Forum, with its presence on the internet, can serve members of Congress and their constituents a place to upload that data into a meaningful data base visible by the public and the media and thereby provide IRS “transparency” that is otherwise not available to identify IRS abuses of power and misapplication of law. Taxpayers can upload their personal experiences with the IRS without disclosing their identity. My main point is that there is no present IRS oversight. Congress has ignored its IRS oversight responsibility and for that reason the IRS has become increasingly prosecutorial and bureaucratic while taking many counterproductive positions that generate a loss of businesses and jobs. I believe that both the House and Senate need to hold hearings on IRS abuses as well as hearings on the effectiveness and efficiency of the IRS. Congress is welcome to use the IRS Forum as a vehicle to help provide IRS transparency that is necessary so that the activities of the IRS are visible by Congress, the public and the media. Alvin S. Brown, Esq.