“An estimated 24,237 taxpayers may have been adversely affected because the Internal Revenue Service did not follow requirements to notify the taxpayers’ representatives of the taxpayers’ rights related to notices of federal tax liens, according to a new report.” This is from this morning’s Accounting Today (July 23, 2015), written by our friend, Michael Cohn.
This is scary. In a study by the Treasury Inspector for Tax Administration, from a sample of 36 cases, 6 lien notices never reached the taxpayer’s representative. That means there is a 16% chance that your representative will not be able to timely file Form 12153. Collection Due Process Application, to protect your rights. That is not a trivial matter, and reflects nothing short of a violation of due process for a material number of U.S. taxpayers.
You know, I’m just not sure about this being an oversight. Something about this bothers me when coupled with what we are starting to see in the field.
I very recently had a case where a Taxpayer’s social security wages were levied. This was during a period of time when we were working with a collection officer to comply with a multi-document request via a Taxpayer Contact Summary. We had procedures and obligations to satisfy during a designated and agreed to time period. Well, during that time period, unknown to us (until we were surprised by a letter, provided to us by our client), the IRS levied our clients social security wages, in full, with none of the statutory limits on such a levy. Whoa.
So I wrote a letter to the collection officer, citing Section 5181.1 subsection (4) of the Internal Revenue Manual, which states “When a taxpayer misses a specific deadline, revenue officers are required to initiate follow-up action within ten (10) calendar days of the deadline unless unique circumstances, such as geographical considerations, etc., warrant a delay.”
Now, although I refer to the IRM weekly and I hate to admit this, it’s NOT the law. But here is how the IRS describes it: “The IRM is the primary, official source of “instructions to staff” that relate to the administration and operation of the IRS. It details the policies, delegations of authorities, procedures, instructions and guidelines for daily operations for all IRS organizations. The IRM ensures that employees have the approved policy and guidance they need to carry out their responsibilities in administering the tax laws or other agency obligations.”
So this was a situation where I believed a discussion with a group manager was in order. Well, I was specifically told by a group manager that they “instruct staff NOT to make such a call when a deadline is missed, and further, (the group manager) would be upset if they ever did.” That is in effect, instructing staff NOT to follow “the official source of instructions to staff that relate to administration and operation of the IRS.” So we, in effect, have a rulebook (IRM) that isn’t worth the paper it shouldn’t have been printed on.
Once IRS collection personnel are free from that, what’s next? We are seeing the Lois Lerner issue unfold. We are seeing articles pointing to bias in not for profit audits based upon IRS employee prejudices (“IRS Should Avoid Bias Risk in Auditing Nonprofits, GAO Finds,” Richard Rubin, Bloomberg, July 23, 2015). And now I am personally being told of instruction to IRS staff directly contrary to their own rule book. Is it not possible, therefore, that in certain cases, perhaps documentation to the POA is somehow mysteriously “forgotten?”
This is the risk the IRS runs when their credibility is waning. Not just the arrogance of selecting the rules they will abide by (which I can attest), but the simple appearance of selecting the rules by which they abide. Once that becomes the perceived culture of the IRS (think Massachusetts Department of Revenue), it’s not hard to speculate on the possibility of representatives suddenly not receiving their copy of time sensitive IRS to taxpayer correspondence. Yes, I hereby submit that it may be more than an accident.
Unchartered waters to be sure. More to come.