Good morning Mr. Chairman and members of the Finance Committee. My name is David Patnoe. I am currently an Enrolled Agent in Camarillo, California, representing taxpayers before the Collections Division of the Internal Revenue Service for over seven years. Prior to this, I was a Revenue Officer for the Internal Revenue Service for over ten years.

During my tenure with the IRS, I was a Revenue Officer, an On-the-Job Instructor for trainee Revenue Officers, an Instructor for Revenue Officer training schools Phase I and Phase II sessions, an "Offer in Compromise" Specialist and an advisor in the Special Procedures function. I have worked in the Anchorage, Alaska; Shreveport, Louisiana; and Brooklyn, New York IRS offices which provided me a great opportunity to see how collection worked in different areas of the country. Now working as a taxpayer's advocate, I have had the opportunity to see things from the other side. It is from this wide range of experience that I speak to you today.

Despite what I believe to be a rather unique background, I have found dealing with IRS personnel to be quite disturbing in a few cases, and downright maddening in others. In particular I have had my worst experiences with people I believe had insufficient training to be performing the jobs they were assigned. In some instances their actions were outright illegal and highly abusive.

The trouble with discussing "abusive" tax collection is that there is no line drawn between regular tax collection and abusive tax collection. When you consider that the very act of a Revenue Officer imposing their will on a taxpayer by use of a levy on wages or retirement funds or a seizure of assets, such as a personal residence, will probably be considered abusive by a lot of people, and surely by the taxpayer themselves. My definition of "abusive" tax collection is the illegal use of certain collection tools, or when the collection tool used is not warranted in that given situation.

Let me give you an example that I think will demonstrate what I believe is occurring far more frequently than people may realize. I was hired to assist in a matter involving the improper use of a levy. A levy is generally the seizure of money in some form. The IRS had issued a levy on one of my client's receivables owed to his business, a sole proprietorship. But the tax that the IRS was trying to collect on the levy was not owed by my client, but was in fact owed by a company that my client had worked for at one time as an employee, with no ownership interest whatsoever.

The Revenue Officer, who at the time was acting as an On-the-Job Instructor for another Revenue Officer, went to my client's business with seizure papers in hand. The client, being faced with the seizure of his new business, became very afraid and paid a payment of $7,000 to forestall the seizure. Now he paid this despite the fact that he did not owe any tax. The IRS basically scared this person or "extorted" him into paying money that he didn't owe with the threat of seizing his business for the debt of the company he had at one time worked for.

After the initial payment of $7,000, this same Revenue Officer issued a levy on one of the client's accounts receivable for roughly $21,000. That money was going to be used to pay the client's payroll, and the seizure of those funds would have effectively put the client out of business. The levy itself was an amazing flight of fancy by that Revenue Officer. Remember, there was no relationship nor common ownership between these companies. The client simply had been an employee of the company that owed the tax. The IRS was well aware of these facts. Despite having the explanation laid out in black and white, the Revenue Officer would not release the levy nor refund the $7,000 she had collected illegally by scaring the taxpayer when she first showed up at his door.

In fairness, let me add that there are instances when a tax can be collected from someone other than the taxpayer. A third party can become liable if there was a transfer of assets for less than fair consideration, or if a party is holding property in their name simply to evade the seizure of those assets for taxes due. However, prior to collecting from a transferee, or a nominee, the IRS must go through a number of steps involving a group called Special Procedures Function, and the office of the District Counsel.

In this particular instance, none of this had been done. I informed the Revenue Officer that she had not taken any of the required steps and had acted without benefit of legal counsel. I added that her actions were not just abusive, but blatantly illegal. The Revenue Officer responded with one word: "AND?"

Only when the Revenue Officer realized that we would make every effort possible to expose this action, did she come back with a release of the levy. When you consider that this was an experienced Revenue Officer acting with her Group Manager's approval, and not to mention also trains other Revenue Officers, her actions were absolutely beyond comprehension. It is this type of action that is designed to intimidate and instill such fear that the IRS' actions can succeed without question.

I would like to say that this type of action did not occur while I was a Revenue Officer. Unfortunately, it did. I know of seasoned tax collectors who were well aware of the law, take actions that were out of the realm of legal tax collection. In one instance, a Revenue Officer who made up a seizure document titled Nominee Levy on the spot prior to seizing assets from someone who was not the taxpayer, was soon after made a Group Manager. In another case, I dealt with a Revenue Officer who had accessed the IRS computer system to get information on a case I was assigned. When I questioned the Revenue Officer why he was accessing information on my case he stated, "..my wife works for this company and if I can help her straighten this (company problem) out it will be a real feather in her cap.." I told the Revenue Officer to put the printouts away. That Revenue Officer also became a Group Manager. These actions were particularly annoying because I believed both these Revenue Officers knew what they were doing was outside the scope of correct tax collection.

When I left the IRS in December of 1989, I considered writing my own thesis about tax collection. I wanted to suggest that IRS tax collectors be held to some standards of training prior to promotion. Not only should they be held to standards of training, but they should demonstrate their knowledge on proficiency tests. No Revenue Officer should be promoted or allowed to train others until they are able to pass increasingly difficult proficiency tests.

While I was working for IRS I was seriously concerned about the Agency's escalating tendency to place unskilled collectors into management positions. I used to call these people the "ninety day wonders" -- ninety days being the span of time they spent doing Revenue Officer work between Phase I and Phase Il Revenue Officer training classes.

Basically, I found that people hired as Revenue Officers would be detailed to do special projects. Usually these projects were thought up by either first line Managers or by upper level Managers. More often than not the project was to justify some type of statistic related to cases closed or money collected. The projects were administrative work that did not lead to a knowledge of collection procedures, or requirements put on Revenue Officers by the laws and regulations.

Because management had put these Revenue Officers on these projects these same Managers would not hold them back when it came time to be considered for promotion. Many times someone who had only attended the two phases of Revenue Officer training was promoted, even though that individual may never have actually knocked on a door, collected tax, or worked with others in the process of collecting taxes. This led to people being promoted who, in turn, qualified to be in management based solely on the fact that they were at the right grade level. I can't remember the number of times I heard, "You don't have to know how to collect taxes to be a Manager, you just have to know how to Manage!" It's amazing that someone who doesn't know much about collection is put in charge of people who are sent out to collect. The person the Revenue Officer is supposed to depend on for the first level of advice on difficult cases only needs to "know how to manage," but not how to collect taxes. It is especially frightening because these Managers are required to review and approve certain actions of Revenue Officers based on their own understanding of what action is appropriate under the IRS policies, as well as the law.

As a result of this training and promotion practice, new Revenue Officers have become less and less effective, while many of the current Managers do not know what the Revenue Officers are supposed to do. Additionally, many of these Managers are basing day to day decisions on whatever they determine important to their own supervisors in order to "look good." And what were these managers judged on? Sheer numbers. How many dollars collected or how many cases closed was -- and is -- the bottom line. Make no mistake about it, there are goals, quotas, that may be unstated but well known to the agent, that are driving many of the actions you will hear about today. So what we have now are Managers who are not thoroughly schooled in the collection of taxes but making decisions based on how they can get their numbers up.

Now the cycle is complete. Managers, knowing little about what their employees are supposed to be doing, are evaluating their employees on how they could collect more tax or close more cases. Since these Managers do not know enough about tax collection, they have a tendency to require the Revenue Officer to take actions that might not be correct but which the Managers feel would lead to a higher closing rate or higher dollar collection. Sometimes the action might even be illegal but the Managers did not know it, simply recognizing that a particular action resulted in more closures. The newer Revenue Officers might not know a particular action is illegal because they haven't been around long enough, or are simply not sufficiently trained.

The new Revenue Officers, who have been taking direction from these Managers, get promoted and are now placed in the position of an "On the Job Instructor." So you see, the cycle continues and the quality of tax collection gets worse. As it gets worse, Congress gets more complaints from irate taxpayers.

In closing I would like to add one thing. I know too many people who collect tax for the IRS that are fine, hard working, honest people to paint the IRS tax collection with a broad brush.

To a great number of employees at the IRS, these abuses are not more tolerable than they are to this Committee. It's a shame that these abuses can cast a cloud over these same people. The number of abuses compared to number of cases worked is still small. It nonetheless, is way too large to be acceptable. No abuse is acceptable.

There are many people with great technical knowledge and skill whose talent would be better utilized teaching and aiding others. The Managers who don't have the knowledge or skill to direct tax collection could learn a great deal from some of these people. They might not learn anything about management but they need to learn about tax collection. This may mean a reduction in production as far as closures and dollars collected for a few months or even a year, but over the course of one to two years, it should result in an increase in collection of revenues and less complaints for the members of Congress to address.

The office of the Ombudsman and the offices of the Problem Resolution Program should be manned with highly skilled tax collectors who are capable of resolving these issues before they become highly contentious issues argued at higher levels.

I want to thank you Mr. Chairman, and members of the Committee, for allowing me to speak here today about a few things that have been on my mind for the last several years.