Recent Congressional hearings on IRS abuses have demonstrated a long-overdue need for legislative protections such as those in The Taxpayer's Bill of Rights, proposed by Senator David Pryor, (D-Ark.). For years taxpayers have testified that IRS collection actions - where most abusive situations arise - were frequently overzealous, heavy-handed, detrimental to the government's interest, and sometimes illegal.

Since the hearings began the bill has picked up a number of co-sponsors as thousands of taxpayers have written or called to complain of abusive treatment at the hands of the IRS. The support for the bill is in response to a growing realization that something must be done to stem the tide of IRS horror stories.

Supporters of the bill contend that a Taxpayer's Bill of Rights is more needed now than ever before. Because of the budget deficit, Congress has given the IRS a mandate to bring in more revenue. Over a three year period the IRS audit staff will increase by 50%. Couple this with stronger powers, increased compliance penalties, and rigorous demands on tax preparers, and the stage is being set for increased friction between the IRS and the American public. Additional safeguards are needed to ensure that tax enforcement is administered in a fair, judicious, sensitive, and professional manner.

IRS collection employees possess a wide range of enforcement tools that are the envy of any creditor. Without a court order, the tax code allows them the power to completely wipe out a bank account, attach almost an entire paycheck, and seize almost anything of value.

The major problem is that taxpayers have almost no rights when dealing with the collection division of the IRS. While there are several avenues of appeal for contesting an audit, there are no formal channels for contesting overzealous, heavy-handed seizure actions, short of filing bankruptcy. Even the Anti-Injunction Act of the Tax Code serves as the "Berlin Wall" of taxpayer equity by prohibiting almost all taxpayers from petitioning the federal courts to stop the IRS from using their seizure powers.

Critics of the IRS contend that the agency has a long history of abusive behavior and has never taken sufficient steps to overcome those problems. In February 1973 taxpayers testified before a Senate Subcommittee complaining of abusive and arrogant IRS actions. In 1976 the Administrative Conference of the U.S. chided the IRS for its indiscriminate and injudicious use of the seizure power. In 1980 Congress heard testimony from taxpayers and IRS employees that was remarkably similar to that heard in Senator Pryor's hearings.

Former IRS employees allege that the agency is beset with problems that have become so ingrained that only legislation could sufficiently protect taxpayers from them. They charge that:

• The IRS has fostered an attitude among its employees that all delinquent taxpayers are "deadbeats."

• The agency ignores policy subversion that occurs in field offices where local supervisors write their own rules in contravention to National policy.

• There is a certain "macho" mentality related to seizure enforcement that is endemic nationwide.

• The National Office is not concerned if their field offices don't follow established policies and procedures.

These allegations are serious because they reflect upon the agency's attitude about how taxpayers should be treated. There is a demonstrable dichotomy between what they say and what they do. For example, the IRS has testified that legislation is not needed to protect taxpayers, that they can do this through the implementation of policies through the Internal Revenue Manual, their operational guidebook. Yet, on several occasions, they have gone to court and challenged the right of taxpayers to restrain the IRS when IRS employees have violated those Manual policies. The IRS contends that the IRS Manual is only an internal document and doesn't confer any rights on taxpayers. Unfortunately, the courts have agreed. Only legislation can protect taxpayers from further abuses.

Among the provisions in the bill are safeguards that would: extend the minimum payment period from 10 to 30 days, authorize the IRS to enter into installment arrangements, require a seizure to be released when the taxpayer has entered into an installment agreement, increase the minimum exemptions from levy, prohibit seizures where the cost of the seizure is more than the value of the property, provide for appeal procedures for jeopardy levies, extend the jeopardy assessment appeal period to 90 days, provide for administrative "Stop-Action" orders in certain cases, allow for an administrative appeal of a tax lien in certain situations, and shift the burden of proof in audit cases to the IRS.

While others are justifiably concerned that the tax collection system must work effectively - after all, the country's revenue depends upon it - and that mechanisms must not be developed that would encumber that effectiveness, IRS's own employees argue that the inordinate emphasis on seizures is irresponsible and unwarranted. They have pointed out that seizures frequently result in the government collecting less tax in the long run. This can happen if the taxpayer's ability to produce income and thereby liquidate his liability is damaged or destroyed by IRS's actions. This seems contrary to IRS's objectives of "protecting the government's interest" and "maximizing the revenue."

The Taxpayer's Bill of Rights proposed by Senator Pryor would go far to ensure that the IRS upholds the integrity of the tax collection system. The timing of the bill is very propitious as the Bicentennial Year of our Constitution has reinforced our perceptions of fairness, justice, and equity. All taxpayers deserve the right to fair, impartial, and judicious use of enforcement authority. Supporters of the bill point out that common criminals and bankrupts are afforded more protections than those granted by the IRS. It's ironic that a country that was born out of a tax rebellion and has given legal meaning to the concept of "innocent until proven guilty," does not apply that same standard to tax cases. Perhaps Senator Pryor is correct in his judgment that it is now time to shift the Burden of Proof to the IRS.

Submitted to:
James Gattuso
The Heritage Foundation

© 1987 By:
Jack Warren Wade, Jr.