Manteca Tax Cheat Files Lien Against IRS Commissioner

There was a story I saw in the Modesto Bee recently about a Manteca woman who pleaded guilty to defrauding the IRS out of about $313,000.  It is not really your typical refund fraud case in the sense that the more popular strategy involves preparing a series of false refund returns claiming smaller amounts.  All the returns together may add up to a small fortune, but no single refund claim appears right away to be anything out of the ordinary.  The Manteca woman wasn’t patient enough for the “slow drip” method apparently; she went all in.  And she lost big time.

Esther Robertson, 57, faces up to 5 years in federal prison and a fine of $250,000.  It is not mentioned in the Modesto Bee story, but typically the fine is in addition to the restitution aspect of the sentencing, which involves the taxpayer paying back what was stolen.  Robertson will have a lot of time to stress about the possible outcome since her sentencing is not expected until September 2015.

Court papers also indicate that, in February 2009, after the IRS was onto her, they issued a bank levy to try to recoup at least some of what was taken.  Then Robertson did something that I’m not sure I quite understand.  Presumably in an act of retaliation, she filed a lien against the property of the IRS Commissioner!  This certainly shows her contempt for the IRS, or the federal government, or both.

There are a number of questionable websites and online sources that claim to cite legal authority for filing a criminal suit against the IRS for taking one’s property.  I won’t link to any of these sites because I don’t really have a beef with them but, trust me, there are hundreds of them.  These are the same sites that are managed by tax protestors who believe taxation is illegal and the IRS has no legal authority to collect taxes.  My guess is that Robertson found  something online about filing a lien against the Commissioner of the IRS and she thought she would give it a try.  She probably didn’t have much to loose at that point either, knowing that the IRS had discovered her foul play and it was only a matter of time before she would be getting a visit from Criminal Investigations.  For Robertson’s sake, I hope this doesn’t count against her during sentencing.

When the IRS Goes Above and Beyond

Sometimes when I call the IRS with questions about a specific tax account, I want them to scour the entire file, read all the notes, research all the issues, and give me all the pertinent details.  Other times I contact the IRS with only one or two very specific questions; I want to get in and get out, and I don’t particularly want them lingering on my client’s account longer than necessary.  The truth is, sometimes (if not most of the time) it is a huge disadvantage trying to deal with the overzealous IRS representative.  They tend to make issues where there are none.  It is as if they don’t have enough work to do so they have to create work for themselves.  Maybe you know what I’m talking about.

Christine O’Donnell knows what I’m talking about.  Back on March 9, 2010 she announced that she was running for the United States Senate.  Later that same day one of these overzealous IRS types named David Smith pulled up O’Donnell’s tax record “just out of curiosity” and leaked her private tax records to reporters.  Or if he didn’t leak it personally, then he put it in the hands of somebody else who did.  And it pretty much ruined her chances of getting elected.  See, the information Smith decided to make public was a Federal Tax Lien (filed when a tax debt goes unpaid).  But it turned out that this information was inaccurate; O’Donnell didn’t owe the IRS.

This story is probably fairly mind-blowing to most people who do not regularly deal with the IRS.  I’m not that surprised by it though, especially the part about the erroneous lien.  The IRS makes mistakes like this all the time.  And as far as I know, David Smith still works at the IRS.

Deceptive FTL Mailers

If you have an IRS tax debt, chances are the government has filed a Federal Tax Lien (FTL) against you to protect its interests, especially if the debt is greater than $10,000.  The FTL becomes public information and any number of non-attorney tax relief companies begins sending advertisements.  Many of our clients have come to us with a sizeable stack of mailers, and I am rather disgusted by the way these bottom-feeders try to trick taxpayers into calling them.  Often these mailers are designed to look like official government otices.

Tax relief firms are normally successful in obtaining the following information from the public record:

  • name of taxpayer
  • address of taxpayer
  • lien type (i.e., Federal / State)
  • lien amount
  • lien filing date

The hope is that the taxpayer will recognize the information, see that it is accurate, and then call to get some kind of government-sponsored reduction of the liability.  At least that is what they would have you believe.

It is easy to identify a deceptive tax lien mailer if you know what to look for.  One of the “red flags” is repetition of information.  The sample mailer that I included in this post repeats a United States Code section three times.  The “personal ID number” is also repeated three times.  Phrases like “please read carefully” and “final notice” are also repeated to add urgency.  It is also common to see a phone number repeated two or three times, but often no address.  And finally, maybe the biggest red flag is an “estimated settlement amount.”  There is no way anyone could estimate what the IRS might settle a case for based on the limited information contained in a Federal Tax Lien.

The Taxpayers' Rights Advocate's Big Announcement

You’ve probably heard of the National Taxpayer Advocate Service (TAS) — this is the quasi-independent agency charged with looking out for the rights of taxpayers across the nation.  They like to say that they’re “your voice at the IRS.”  The head of TAS is Nina Olson and she has made her way into this blog on several occasions.  And if you live in California, you may know that we have a state counterpart to TAS called the Taxpayers’ Rights Advocate’s Office, the top advocate being Steve Sims.

These advocate groups, on both the national and the state level, love to point out what they have done to fight for the average taxpayer in the name of tax relief.  So I wasn’t surprised to see a self-congratulatory statement from Sims in the July 2013 edition of the FTB Tax News newsletter.  And I wasn’t surprised that the statement had to do with increasing the lien filing threshold for Californians with state tax debts.  The IRS did this too some time back as a way to help those who struggle with heavy tax burdens in a down economy.

A tax lien is a collection tool used by both the IRS and FTB to protect their interest when taxes are owed.  When a notice of tax lien is filed, it puts other creditors on notice and acts as a smudge on that person’s credit.  Increasing the threshold for lien filings is a good thing for both taxpayers and the taxing entity; it has been shown that they are one of the least effective tax collection tools anyway.

So, what was surprising then?  Well, Steve Sims announced that FTB “increased the general guideline amount for filing a lien from $1,000 to $2,000 beginning in July 2013.”  What a miserable little success that was for him and his staff!  Hardly worth bragging about in my humble opinion.

Three Projects for the New Commish

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Forbes contributor Stephen Dunn recently blogged about the challenges facing the presently-unnamed IRS Commissioner.  He identified three problems that he feels should be given serious attention once the new commissioner takes office.

1. IRS practioners need a more efficient way to get their hands on taxpayer transcripts.  It is inconceivable that Dunn, as a 27-year tax attorney, would be unable to gain access to his clients’ transcripts through IRS’ E-services.  However, I can personally attest to the complications involved in registering for E-services.  There is no reason why a tax attorney should have to call the IRS simply to order transcripts.  The procedure needs to be simplified.

2. The IRS should change its federal tax lien (FTL) filing procedure.  Dunn believes that the current practice of public lien filing opens the door for abuse by shady tax resolution firms who use lien lists to mass mail thousands of fliers encouraging recipients to call for tax help.  I can see his point here too, even though the abusive tax lien mailers are pretty easy to spot.  Instead, Dunn proposes a solution whereby firms or individuals would have to affirmatively request FTL information from the IRS instead of having that information available to the public.

3. The IRS must stop sending out refunds based on fraudulent 1099 forms.  This popular scam has truly gotten out of control, with millions of dollars being paid to criminals each year.  And it really needs to be prevented on the front end because after the refund has been paid, it costs way too much to try to get the money back.

The new commissioner is certainly going to inherit a large “to do” list.  This is only the start.

Interesting IRS Stats

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Let’s look back on some of the statistics compiled by the IRS for Fiscal Year 2011 and try to determine what will be reported for FY 2012.  Will we see any new tax relief trends?  My source is the Statistics of Income tax stats found in the “IRS Data Book.”

  • Number of new deliquent tax accounts in FY 2011: 8,011,000 (17,000 more than 2010)
  • Number of untimely filed returns by end of FY 2011: 3,862,000 (162,000 more than 2010)
  • Number of Offers in Compromise filed: 59,000 (2,000 more than 2010)
  • Number of Offers in Compromise accepted: 20,000 (6,000 more than 2010)
  • Number of Federal Tax Liens filed: 1,042,230 (54,146 less than 2010)
  • Number of levy notices served on 3rd parties: 3,748,884 (142,066 more than 2010)
  • Number of seizures: 776 (171 more than 2010)

The only stat that appears to be on a downward trend is the filing of Federal Tax Liens.  This is good news for taxpayers.  For several years now advocacy groups have been questioning the efficacy of tax liens as a collections tool; maybe the IRS is finally listening.

More and more taxpayers continue to file and pay late, and incur tax debt.  And the IRS tries to keep pace by increasing active collection activities.

What about the Offer in Compromise acceptance rate?  You see a lot of percentages thrown around by tax attorneys and tax resolution firms.  But according to IRS’ figures, they accepted 25% in 2010 and 34% in 2011.  This is probably the most encouraging data of all. Let’s hope this trend continues and the IRS accepts event more offers in compromise when the statistics are available for FY 2012.

IRS Still Not Giving Proper Notice of Liens

Three years ago the Treasury Inspector General for Tax Administration (TIGTA) recommended that the IRS change its practices regarding tax lien notices, and from the looks of this year’s lien notice audit, it does not appear that the IRS has any intentions of doing so.

Today TIGTA released its 2012 lien notice audit to the public and some of the same problems they identified in 2009 still linger. The issue that the IRS has swept under the rug and ignored for the past 3 years has to do with notifying taxpayers’ representatives of a lien filing.  Specifically, they’re not consistently doing it.  The IRS promptly notifies taxpayers by mail when it registers a lien against them, and it is supposed to send the same notice to their attorney, CPA, or other representative with a Form 2848 Power of Attorney on file.

 [A]s noted in previous audits, the IRS did not always follow its own internal guidelines for notifying taxpayer representatives of the filing of the NFTL.  Therefore, the rights of some taxpayers may have been violated when the IRS did not notify their representatives of lien filings.

~ J. Russell George, TIGTA

Furthermore, the IRS does not always send lien notices to the taxpayers’ last known address.  According to the report, there are instances in which returned lien notices with bad addresses could be resent to the correct addresses, but nothing is done about it.  Just another instance of TIGTA needing more teeth to actually enforce rather than recommend.

Notice of Federal Tax Lien

Most people who come see us for tax relief want to pay their taxes, but do not have the money. Some ask, “What happens if I don’t pay the IRS?”  One of the consequences of failing to pay your taxes is the filing of a Notice of Federal Tax Lien.  It is a relatively simple document showing the type of tax that is owed, tax form number, tax period, the unpaid balance(s), and the following rather blunt language:

“[W]e are giving a notice that taxes (including interest and penalties) have been assessed against the following-name taxpayer. We have made a demand for payment of this liability, but it remains unpaid. Therefore, there is a lien in favor of the United States on all property and rights to property belonging to this taxpayer for the amount of these taxes, and additional penalties, interest, and costs that may accrue.  [IRS Form 668(Y)(c)]

In case there is any question as to what “all property” means, the following explanation can be found on the reverse of the form:

“This Notice of Federal Tax Lien gives public notice that the government has a lien on all your property (such as your house or car), all your rights to property (such as money owed to you) and to property you acquire after this lien is filed.

Does the IRS View Marion Barry as a “Special Circumstance”?

Former D.C. mayor, Marion Barry, is in the news today because of a lien that the IRS filed against him in connection with a measly $3,200 in unpaid 2010 taxes.

Remember back in February of this year when the IRS announced it was going to provide taxpayers with special tax relief during these trying financial times? The IRS dubbed it the “Fresh Start” initiative. Remember when I blogged in June about the uncertainties of the program and how the IRS still had not clarified some major points? Remember what I said about the new lien filing procedures; how the lien filing threshold was reduced from $10,000 to $5,000 in most cases? According to the IRS website:

The Fresh Start changes increase the IRS lien filing threshold from $5,000 to $10,000. Liens may still be filed on amounts less than $10,000 when circumstances warrant. (emphasis added)


So, why did the IRS file a lien if the balance is under $5,000? Well, it appears that Barry’s 2010 liability is only the tip of the iceberg. He still owes for prior years, for which he is on an installment agreement in good standing, according to Barry’s official statement. It appears that the IRS will be looking at the overall balance in determining whether to file a lien, even under Fresh Start. At least that’s one possible explanation. The other possibility is that the IRS would have filed a lien on Barry even if $3,200 were all he owed . . . because circumstances warrant it. Let’s face it, he’s a public figure sitting on a Finance Committee in D.C, in charge of public funds, and he has a colorful history of corruption and tax delinquencies. If that isn’t a special circumstance, then I don’t know what is.

IRS Fresh Start Webinar

The IRS webinar detailing their Fresh Start Initiative, which originally aired on August 31, 2011,  has been posted to the IRS video portal for all to see.  The Fresh Start Initiative is a tax reliefprogram designed to help taxpayers who are struggling to meet their tax obligations in this down economy.

As part of the initiative, the IRS has adjusted its lien filing procedures, opened up the installment agreement option to more businesses, and  instituted a “streamlined” Offer in Compromise program. I was hoping the IRS would, through this webinar, elaborate on the Fresh Start program and provide more details on exactly how these changes will impact taxpayers with balances that they cannot immediately pay. But they didn’t. Instead the speakers rehash what has already been explained on the IRS website and then go into a fairly detailed discussion of liens.

This is a good video for someone who wants a basic understanding of liens, how & why the IRS files them, and how to get them released. The IRS representatives even go into an explanation of lien “release” vs. lien “withdrawal,” complete with an analogy comparing it to a “divorce” vs. an “annulment.”

Unfortunately, very little was said about the changes that have been made to the Offer in Compromise program either. Click here to see the entire video.