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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

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What Happened to the "New" IRS?

Posted on in Tax Rants

Maybe I’m showing my age, but I recall the “reinvention” of the Internal Revenue Service following the nasty Senate hearings in 1998.   

This was before 9/11, when our government’s problems were consistent with a simpler, less troubled time.  For those of you who weren’t of age at the time to care about such things, or perhaps weren’t even inhabiting this planet yet, these hearings were a big deal.  The Tax Collector was put on trial, and the proceedings televised to the nation – the IRS’ Watergate.  Current employees provided testimony behind curtains with masked voices like the adults in Charlie Brown cartoons.  Taxpayers complained bitterly about the “Gestapo-like” tactics of aggressive Revenue Officers and Special (criminal) Agents. 

The aftermath?  Our government’s procurement of a million dollar consultant study analyzing the structural and other problems with the IRS bureaucracy.  The study led to some new legislation – the third, but most significant ever, Taxpayer Bill of Rights.  Also, the IRS reorganized itself, and rolled-out a functionally (rather than geographically) based bureaucracy, while at the same time publicly dedicating itself to improved customer relations and a responsive, educating, client-servicing agency.   The “New” IRS. 

Tax Lien filings and levies dropped significantly in the wake of the roll-out.  Seizures were dramatically reduced and, in part due to the new protective legislation requiring a district court order, the taking of residences to satisfy tax debts all but disappeared entirely from the IRS Collection toolbox.

Shortly thereafter, the offer in compromise program criteria were liberalized, so instead of a 95% plus rejection rate, more and more taxpayers started realizing the “fresh start” promised by the alternative.   And the government reportedly reduced its receivables significantly, making it more resemble a business.  Good for everybody. 

But these are now the memories of a winsome, middle-aged man.  Because such is not the IRS of 2016.  Not by a long shot.    

In less than 20 years, the Service has, in my opinion, reincarnated itself back to the draconian, nightmarish bully that me and many practitioners of my generation thought had been buried forever.    

I have been thinking a lot about these evolved changes in IRS culture as I currently struggle with a local Revenue Officer who has demonstrated old school intimidation tactics, like the loose cannons of days gone by.  He is a young smart guy, but utterly lacking in any sense of cooperation or professionalism.  This is a strategy that, I believe, not only negates a taxpayer’s ability and desire to come into compliance, but also undermines confidence in the entire system.  It is short-sighted, and downright cruel, in many instances.  

The situation reminds me of a notorious Collection group manager (now deceased) that I had the opportunity to defend in an attorneys’ fees case brought in the Tax Court against the Service when I was working for Chief Counsel back in the early 1990s, prior to the structuring.   Although I cannot share the details, this guy’s reputation for the extent of hostility and aggression with which he trampled over taxpayers in the name of protecting the government fisc was legendary.  And deplorable.  The boxes of taxpayer complaints against him both as a field collector and supervisor had no impact on his conduct or retention. 

1998 was supposed to change all this.  And for a while, there were some real improvements – in professionalism, taxpayer (“customer”) satisfaction, practical resolutions, restored confidence in the system…mostly anecdotal, for sure.   But it felt different.  And us practitioners were able to assist our clients with getting them back on the road to compliance quicker and with less psychological and economic  damage to them and their businesses.

In future rants (every two weeks from here on out, I promise and pledge!) I will describe my observations of specific areas in which the IRS has fallen away from its mission including the dismantling of the Offer in Compromise program, the impotence of Collection Due Process, and the lack of independence of the separate review functions within the IRS.   

But amidst all this gloom and doom, I want to share with you my overriding optimism for working with the IRS and achieving profoundly positive results for virtually all my clients.   Like the peace and love ethos of the 1960s hippies that forever changed our society for the better, I believe the 1998 hearings and its aftermath impacted many IRS employees.  There was no doubt a trickle-down of those practical, customer-oriented values that constituted the intended core change in IRS culture. 

They are here and I encounter those individuals and affirming values every day in my practice.  And while they do not pervade the entire IRS as was promised, those good apples, embodying a pragmatic, cooperative approach to resolving issues on a win-win basis, supply me with the energy to fight on behalf of all my clients the battle against taxpayer abuse committed by the bullies amidst their ranks.

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