Did you really testify on Capitol Hill?

In January, 1997, I received a call from The National Commission on Restructuring the Internal Revenue Service. A respected tax attorney in Phoenix had given them my name as someone with experience as on “both sides of the table”. I had been with the IRS for five years and then had been in private practice as an Enrolled Agent for five years. My views had become known through postings on the NAEA (National Association of Enrolled Agents) Tax Channel on America Online. After a few conversations, I was invited to come to Capitol Hill at government expense and testify before The Restructuring Commission.

Unlike the more well-known Senate Finance Committee hearings, The Restructuring Commission was more academic and dealt with improving the IRS and not just telling a series of horror stories. The Restructuring Commission was made up of two US Senators, two members of the House of Representatives, the IRS Commissioner & representatives of major corporations, accounting organizations and consumer groups.

My testimony occurred in the Hart Senate Office Building & focused on abuse by the IRS collection division. This schedule on the US House of Representatives website shows me as having testified on February 26, 1997. Before the bright lights of the TV cameras and sitting right next to the IRS Assistant Commissioner, Collection Division, Ronnie Rhodes (my former boss when I worked for the IRS!) and the IRS Chief Compliance Officer, James Donelson, I spoke about how IRS policy and personnel had to be reigned in.

The full text of my testimony before The Restructuring Commission is available here. While I covered a broad range of topics, the primary areas of concern were:
1) Unfair treatment taxpayers received in certain IRS districts;
2) IRS was forcing taxpayers to file bankruptcy just to close cases;
3) The Offer in Compromise program appeared to be dying;
4) IRS was forcing taxpayers to sign waivers to extend the time to collect taxes as far as 25 years into the future;
5) IRS allowable expense standards for housing & utilities were very unfair:
6) Managers were forcing Collection Division employees to seize, levy and lien even when it was not warranted.

Of course, the most important thing isn’t that I testified. The question is, what changes have taken place in the past two years? The great news is A LOT!!!

I was very concerned with the practice by IRS Revenue Officers of demanding taxpayers sign extensions of the collection statute. Under the law, the IRS normally has 10 years to collect tax due. However, on cases where the taxes were not going to be paid in full within the 10 year period, the IRS often demanded taxpayers sign a waiver to extend the time to collect the tax. I brought proof of cases where the IRS had forced taxpayers to sign statute waivers out to the year 2025! That’s not a typo.

The historic Restructuring & Reform Act of 1998 now only allows the IRS to request a waiver at the time a payment agreement is set up. The IRS can no longer come back and demand a taxpayer sign a waiver just because the time to collect the tax is about to expire. And most importantly, all waivers currently in existence automatically expire on 12/31/2002. That means all those taxpayers who thought they would have to pay the IRS until 2025 can finally see some light at the end of the tunnel. (Important note—This does NOT affect the normal 10 year collection statute)

I’m very happy to report that the Offer program is stronger than ever. I voiced deep concerns about statements made by some IRS managers that they were “de-emphasizing the Offer in Compromise program” and were refusing to consider Offers below a certain dollar amount. Federal law now prohibits the IRS from refusing any Offer solely on the basis that it is a small amount. And, more IRS personnel are working Offers than ever before. Clearly, the Restructuring Commission saved the Offer program from the scrap heap.

There has also been historic change in the way Collection Division employees are measured. It is a violation of Federal law to judge employees in any way by the number of liens filed or levys served or seizures performed. The IRS isn’t even allowed to keep statistics on most of those enforcement actions.

Housing expenses are still a major problem area especially here in the San Francisco Bay Area. With the average home price in my county (San Mateo) at $440,000 the amount the IRS allows is terribly unfair. However, we’ll keep fighting until we get the IRS to understand the reality of what people spend.

Hopefully, there will be more opportunities to testify in the future. Again, if you have nothing better to do, please take a glance at the full text of my testimony.