Summons More Popular with IRS These Days

Posted by Wetenkamp on
image via criminallawyerillinois.com

The administrative summons is a legal tool that has historically been used by IRS revenue officers and agents only in extreme cases.  It used to be that when a taxpayer came to me with a summons, I could be fairly certain that they had ignored multiple requests and/or missed multiple deadlines for production of documents.  But things may be changing.

If a taxpayer misses an IRS deadline, he/she can expect the IRS to activate various collection tools like a wage garnishment or bank levy.  But if a taxpayer does not comply with a summons, and the IRS decides to enforce it, then the Justice Department becomes involved in the matter, and he/she could actually face contempt charges.

According to a recent Reuters article, IRS management is encouraging its collections force to use the summons more liberally.  Taxpayers can fight a summons, and statistics show that disputes involving summonses are definitely on the rise.  There were 44 summons-related disputes in 2005 compared to 132 in 2011.  It is the most commonly litigated issue last year.  However, statistics also show that the IRS normally wins.

In order to prevail in a summons dispute, the taxpayer must prove that the information requested by the Service is not relevant, or that the Service did not follow procedure in issuance of the summons.  90 percent of the time, the taxpayer cannot meet this burden of proof.

Tennessee Man Gets 2 Years in Prison for Theft of Under $10k

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If George Albright had known the magnitude of the risks he was taking by filing false refund returns, I don’t think he would have done it.  He was sentenced to two years in prison on Wednesday.  Albright, 57, worked for the IRS for 17 years.  During the period of 2008-2011 Mr. Albright filed false income tax returns using confidential financial information available to him by virtue of his position at the IRS.  And for his efforts, he earned himself a dismal $9,600.  There are criminals on the streets of Tampa, FL who could make that kind of money in one day!

Judges tend to show very little mercy to federal government workers with tax problems, especially Internal Revenue Service employees, who cheat the very system they’re a part of.  And the U.S. Attorney’s office prosecutes these cases very aggressively:

Anyone filing a fraudulent tax return and anyone employed in a position of public trust should take note of the prison sentence they risk if they engage in this sort of criminal conduct, even if they have no criminal record.

~ U.S. Attorney Jerry Martin

On a side note, in Florida, tax collectors are independent elected county officers responsible for collecting a variety of taxes and fees.  The Collector for Marion County, FL happens to be named George Albright.  Same name; different guy.

irs.gov upgrades

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photo via oprah.com

The IRS website is getting another makeover within the next few weeks.  It looks like many of the changes will be cosmetic/visual.  Hopefully the “before” isn’t better than the “after.”

I don’t mean to say that the changes will be entirely superficial.  Sometimes it makes sense to rearrange content that was already there before so visitors can navigate to what they want more quickly.  Anything that enhances access to tax relief information is fine by me.

For example, we will have access to subscription services from the home page.  I get IRS news and updates sent direcly to my email inbox, but I can’t remember how I set that up because it was years ago.  So having the ability to add or modify subscriptions right from the home page seems like a positive change.

Some changes to irs.gov are part of an effort to make the website pages match up better and appear more consistent.  IRS also promises enhanced search capabilities — a very important upgrade from the point of view of a tax attorney, and for a website with such extensive content.

The most interesting change will involve transitioning to an “intent-driven navigation structure.”  I think this means that irs.gov will attempt to understand what you want to see before you ask to see it based on historical nagivation information that it “learns” as you surf.  We’ll see how this works.  It reminds me of Genius Mixes and Smart Playlists in iTunes.  I haven’t been too impressed with technology that predicts what I like.

“it might so happen that you forget to pay your taxes”

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The tax man does not discriminate.  Tax problems do not follow any particular socio-economic group; those with back tax debt are as diverse a segment as any.  But it’s interesting how, as a society, we tend to make judgements as to who should be afforded tax relief and who should be required to pay.

We tend to show little mercy when it comes to celebrities.  This guy, for example:

photo via biography.com

Jose Canseco filed bankruptcy recently with intentions of wiping out his mountain of debts, including $500k owed to the IRS.  The web is rife with merciless comments about Canseco and his financial problems.  There is widespread contempt for this man, and even more so now that he’s filed bankruptcy and made some douchey comments recently:

The issue is very simple: If you’ve got friends and family, the more money you make the more you spend on them. So let’s say you spend half your money on them and the rest on yourself and the cost of living. It may so happen that during all of that you forget to pay your taxes.

and . . .

To me, it doesn’t make any sense: If the government prints its own money, why are we in debt?

Another example is Flavor Flav who owes the IRS over $900k.  Behind the oversized clock necklaces and bad reality show gigs is a feeling human being with real-life doubts and worries . . . and mounting tax bills.  However, many people have a hard time getting past the clocks and believe he just needs to pay up.

photo via theurbandaily.com

I don’t get too upset about these stories.  The IRS isn’t settling these tax debts through the Offer in Compromise program.  Even if they qualified for a tax settlement on paper, the IRS wouldn’t accept them as a matter of public policy.  And bankruptcy normally doesn’t wipe out the entire tax debt.  Believe me, these high-profile tax cases get worked very carefully and the IRS gets as much as possible, whether through liquidation of assets or a payment plan, or some combination of both.

A Former IRS Agent’s Witness Tampering Fail

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image via movies.ign.com

I don’t understand how anyone could think that witness tampering would work, at least not where you plan to kill unfriendly witnesses.  Its one thing to bribe witnesses, or threaten them so that you get just what you want from them on the witness stand, or even to ensure (somehow) that they are not available to testify.  But its quite another thing to actually murder them.

Former IRS agent, Steven Martinez, was picked up by the FBI recently for plotting to kill four witnesses that were going to testify against him in a criminal trial that involved defrauding clients to the tune of $11 million.  Martinez’ poor decision-making skills followed him all the way to trial where he decided he would have not one, but four witnesses, killed — and he didn’t think that would appear suspect (all four of them dropping off at about the same time)?  Even his hitman selection demonstrated poor judgment because the guy he picked had a conscience and turned Martinez in.

There must be something about the repetitive harrassing of taxpayers, denying tax relief, and blindly following procedure that saps all the common sense out of IRS employees.  If Steve Martinez is any example at all, they certainly make very bad criminals.

ITIN Procedure Seriously Flawed; IRS has Known for 10 Years

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Individuals who are working in the United States but are not eligible to obtain a Social Security Number may apply for an Individual Taxpayer Identification Number (ITIN) for IRS / tax purposes.  According to an audit report by the Treasury Inspector General for Tax Administration (TIGTA), a substantial number of “questionable” ITIN applications are not being detected, resulting in ITINs being assigned improperly.  This results in fraudulent tax returns and billions of dollars thrown away in fraudulent refunds.  The ripple effect often results in the IRS having less resources for helping people with innocent tax problems who are seeking some kind of modest tax relief.

Some IRS employees complained to Congress that their supervisors have not been concerned with questionable ITIN applications, only with the volume of applications processed.  Congress asked TIGTA to look into it, and now TIGTA’s report substantiates the employee complaints.  Here is what TIGTA found:

  1. IRS management has created an environment that discourages ITIN application reviewers from identifying questionable/fraudulent applications
  2. Current fraud detection procedures are inadequate
  3. There were processes in place that would have disclosed fraud patterns in ITIN applications, but IRS management eliminated them

It appears that some of the problems with the ITIN application process have gone unfixed for at least 10 years:

Some of the deficiencies we raise in our report have been brought to management’s attention long ago. Some were raised in a September 2002 report issued by an IRS-initiated Task Force. However, management has failed to take sufficient action to address those deficiencies.

Treasury Inspector General, Report #2012-42-081

In response to this report, Rep. Sam Johnson (R-Texas) has asked Doug Shulman to admit he has not been fulfilling his responsibilities and to resign from his position as IRS Commissioner.  The IRS has not responded to Rep. Johnson.

OIC Comes in Different Flavors

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image via icanhasinternets.com

It may surprise you to learn that there is a tax resolution program on the books that permits the IRS to write off a tax liability or settle a tax debt for less than what is owed even though the taxpayer has the ability to pay it in full.

You’ve probably heard of the Offer in Compromise (a.k.a., tax settlement), but you may not be aware that there are several different kinds of offers.  Here is a brief overview:

  1. Doubt as to Liability Offer: Genuine doubt exists that the IRS has correctly determined the amount owed.
  2. Doubt as to Collectibility Offer: Taxpayer cannot fully pay the tax due; therefore, the IRS accepts an amount equal to what it reasonably can expect to collect — “Reasonable Collection Potential” (RCP) — as payment in full.
  3. Doubt as to Collectibility (Special Circumstances): Taxpayer cannot fully pay the tax due but has proven special circumstances that warrant acceptance for less than RCP.
  4. Effective Tax Administration Offer: RCP is greater than the liability (i.e., on paper the taxpayer has the ability to pay in full) but there are economic or public policy/equity circumstances that would justify accepting the offer for an amount less than full payment.

Some additional requirements for ETA Offers:

  • Taxpayer does not qualify for consideration under the other OIC programs
  • The taxes can be paid in full either by lump sum payment or via installment agreement
  • compromise of the liability does not undermine voluntary compliance with the tax laws

 

The Tax Code Exclusion for the .00039 Percent

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White House Press Secretary, Jay Carney, told reporters today that President Obama would support a bill to exempt US olympic athletes from paying income taxes on olympic prize money.  He was referring to a bill introduced by Sen. Marco Rubio (R-FL) last week.

Well, the President believes that we should support efforts, like I think the bill you’re referencing, to ensure that we are doing everything we can to honor and support our Olympic athletes who have volunteered to represent our nation at the Olympic Games. So he supports that bill. If it were to get to his desk, he would support it.

~ Press Secretary Jay Carney

Tax Girl points out that bills like this further complicate the tax code in an era when we should be more interested in simplifying.  It seems this was nothing more than a strategic election-year political statement, as it doesn’t make sense to carve out a tax help exception for such a small segment of society.  How small of a segment?  Well, we sent 529 athletes to the London Games this year.  And as of June 8, 2012, the IRS had received 137,200,000 individual tax returns for the 2012 filing season.  I’m all about increasing tax relief opportunities but, conservatively speaking, (since many return filers are still under extension) we’re talking about .00039 percent of taxpayers benefiting from such an exclusion!

Gibson Case Settled

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photo via freerepublic.com

Gibson Guitar Corp. settled its criminal case with the Justice Department today, at least that’s when the public announcement was released.  Gibson basically paid to make it all go away.  Federal prosecutors agreed to drop the criminal case on the following conditions:

  1. Gibson pays $300,000 penalty
  2. Gibson donates $50,000 to the National Fish and Wildlife Foundation
  3. Gibson forfeits claim to $262,000 worth of exotic woods seized by the feds

Gibson CEO Henry Juszkiewicz had been publicly denouncing the actions of federal authorities ever since they raided the Tennessee-based facilities last year, reminiscent of taxpayers and taxpayer rights groups who oppose overly-aggressive IRS tax debt collection actions.

Juskiewicz stated that it would have cost the company much more to defend themselves in the litigation than the roughly $600,000 that they paid (and forfeited) in the settlement.

Interesting Point

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Chick-fil-A is what it is— a successful company whose founder’s personal views define its corporate culture. It’s a Ben and Jerry’s for the right, with an equally high calorie count.

~ Janet Novack, Forbes Writer