My name is Bruce A. Strauss and I'm currently an Enrolled Agent licensed to represent taxpayers before the IRS. I have been President of the Enrolled Agents in our five county area in Florida for the past three fiscal years. I retired from the Internal Revenue Service after 31 years, the last 18 of which I held the position of Division Chief within the Collection Division. I also received nine consecutive performance awards from 1983 through 1991. At the time of my retirement (April, 1992), I was Senior Division Chief.

I tell you this trusting you will accept the fact that I have considerable expertise regarding the operations of the IRS. This includes its history, its authorities, its personnel practices, and also its problems. Since beginning my practice representing the public as an Enrolled Agent, I have become increasingly concerned about the ability of the IRS to be fair and objective in dealing with the American public. I am also concerned with the public's fear of the IRS. THIS ENVIRONMENT OF FEAR MUST CHANGE. That is why I sit before you today.

The IRS has been very successful in its primary mission of collecting taxes, bringing in over $1.3 trillion in FY '95. It is a role model for other countries to follow, and has played no small role in the economic success of this nation.

Obviously, I do not believe this system is broken. However, my experience and the feedback I receive in my work, tell me the public's confidence in the IRS is being eroded by the perception that it is losing its ability to apply the Internal Revenue Code and the resulting morass of regulations in a fair and objective manner. When a dispute with the IRS rises, the current systems in place to deal with the dispute are cumbersome, expensive, time consuming, and often times ineffective. The result is that the fear of the IRS continues to grow. THIS IS AN UNACCEPTABLE CONDITION.

In a Democracy, the first condition that must be met is that the government must respect the citizens that it serves. I am not sure that condition exists today within the IRS. My purpose today is to assist in restoring the confidence of the American public in the Internal Revenue Service.

One of the problems which affects the way the IRS personnel interacts with the taxpayers is the drive to achieve statistical operational objectives. One of the primary drives, if not THE primary drive, for the Examination Function is, "dollars recommended for assessment". This statistic does not measure how much money was actually collected nor does it measure how much additional tax was actually assessed via the examination process. It only measures what the Examination Function proposes to assess against the taxpayer (30 day letter). The examination function made this measurement one of the operational objectives for Branch Managers and above, as I recall, in FY 90. About the same time, the formal quality review of cases being issued 30 day letters was ceased. A fundamental principle of any organization is that employees will give their managers what their managers tell them is important. Or expressed a different way:

AN ORGANIZATION IS DRIVEN BY THE OBJECTIVES
ON WHICH THE MANAGERS ARE EVALUATED.

As a result, an environment or culture has emerged within the IRS that has made its employees often callous to the rights and concerns of the taxpayers. Statistical objectives for any agency with the power of the IRS are inappropriate, but when one considers the IRS has a measurement of what is "recommended for assessment", this drive to achieve specific objectives becomes intolerable.

I have significant compassion for the IRS employees in their most delicate responsibility of ensuring that each citizen files and pays their fair share of taxes. But based on my knowledge, the primary problem lies with the ineffectiveness of the top management of the IRS. Instead of assessing the current problems and taking appropriate steps to ensure correction of these problems, what I see taking place is a "circle the wagons" mentality. This management approach has lead to significant problems which include:

1. Denial of mistakes which lead to integrity issues.

2. Using a sledge hammer to resolve compliance problems:

a. IRS files a return for the taxpayer, with the tax significantly overstated;

b. Use of Bureau of Labor Statistics to assign additional income;

c. Not applying Internal Revenue Code sections which benefit the taxpayer.

There is a mentality within the IRS that mistakes are rare, and those that do gain notice are blown out of proportion. In fact, I would not be surprised if, as a result of this hearing, you hear that any Complaints by taxpayers which you may raise, while unfortunate, are statistically irrelevant due to the 200 million returns that are successfully processed each year. Based on my knowledge, such a statement would not be factual. The truth is that of the Examination Function cases that I have seen as a representative of the taxpayer, the IRS often does not operate within its proper authorities. When called on these matters, the IRS response is often a denial, or a "spin" is put on the issue in an attempt to protect their position. Such conduct shows a complete disregard for the taxpayer and their fundamental rights as citizens.

I know of numerous cases where the IRS has specifically exceeded its authority. In one of most egregious examples, the IRS (Collections) pre-determined that 637 taxpayers were liable for employment tax; [they did not conduct legitimate investigations] used extortion tactics to have taxpayers sign returns which the IRS prepared; did not use any IRC sections which benefit the taxpayer; and disregarded established law, authorities and procedures. 630 of these taxpayers were also denied their "Due Process Rights". When I brought this matter to their attention, instead of taking corrective action, they "circled the wagons." After three years of my pursuing a resolution of this matter, the IRS has boxed itself into a position with significant integrity issues in question. The current status is that I have been unable to obtain a legitimate response from the Regional Commissioner.

Another example is the tactic of assessing a tax twice for the same 1040 tax form. The tactic involves accepting the Schedule C income, but disallowing all the related business expenses. When the taxpayer requested the case to be reopened, the deductions were allowed, but then the IRS reopens the income issue (in direct conflict with the IRC) and assesses additional taxes based on the Bureau of Labor Statistics income information to boost the income of the taxpayer. Then the taxpayer was informed that he has no appeal rights to contest the additional resulting tax.

The advent of the concept, as shown above, that the IRS now has the authority to assign additional income to a taxpayer at its discretion, without any basis in fact, is frightening and absolutely unacceptable.

I admire the current efforts of Congress, such as the "Commission on Restructuring the IRS" to encourage the IRS to become more responsive to the public. I also appreciate the opportunity to contribute to the process by testifying at this important hearing, and I commend you Mr. Chairman for the courage to engage in this effort. But I do believe that Congress must share some of the blame for what has happened. Funding must be consistent with a long term philosophy, and the oversight of the IRS must be significantly improved. This hearing today is a great start, but long overdue.

For each of you dealing with your constituents, I would offer that fact that the ability of any single Congressional staff to resolve a taxpayer issue with the IRS is extremely remote. I would suggest forming a single staff of highly trained and skilled individuals that could be a central clearing house for all taxpayer complaints received by the Congress. This would also provide a database of problems, that when noticed to be widespread, could be used to make system wide corrective actions. It is only in this way that the management of the IRS can be held accountable to the Congress and to the American people.

I am submitting a more comprehensive statement for the record, which includes some of my recommendations to remove the fear of the public when dealing with the IRS. I sincerely hope that my 31 years of experience with the IRS has helped in some small way to Create a clearer picture of the agency. The many good people of the IRS, who perform a difficult task everyday, and the taxpaying public deserve your best efforts at cleaning up this important national asset.