PERSPECTIVE: THE IRS IN TRANSITION
“THE IRS MISSION STATEMENT”
“PROVIDE AMERICA’S TAXPAYER TOP QUALITY SERVICE BY HELPING THEM UNDERSTAND AND MEET THEIR TAX RESPONSIBIITIES AND BY APPLYING THE TAX LAW WITH INTEGRITY AND FAIRNESS TO ALL (PUBLICATION 594)”
“THIS MISSION STATEMENT REFLECTS THE NEW ATTITUDE AT THE IRS.” Released by an IRS Commissioner.
The IRS has been on an administrative roller coaster for many years. When the IRS Restructuring and Reform Act was passed in 1998 the new law profoundly impacted the IRS. For several years the IRS was consistently inconsistent. There were changes caused by the federal legislation and numerous directives from the IRS National Office. Immediately after the Act was passed IRS seizures and levies were reduced dramatically. The then IRS Commissioner, Charles O. Rossotti, outlined a new administrative structure to accomplish the primary goal of emphasizing “service to taxpayers”. In theory, taxpayers were to be treated as customers.
The IRS was to be transitioning into a “friendlier” IRS. The trend, however, since 2007/2008 is an IRS throw back to its more traditional role of being the toughest creditor in the United States. This, in part, is believed to be a function of an unbalanced federal budget. It may be partly due to enhanced computer programs.
IRS officials currently believe that there is a “revenue gap” with the IRS devoting immense computer resources to fill that gap. The main focus seems to be the 41,000,000 proprietors who file Schedule C returns (proprietorship income tax reporting form) which are an attachment to their Forms 1040. The Small Business/Self Employed Division is being charged with expanding audits of these returns as well as aggressive tax collection. It is not new for large corporations to be targets; now targets are small and medium size businesses. Fully 95% of the major companies in the United States are audited every year. Schedule C audits have more than doubled within the past five years.
Despite increased IRS efforts to collect taxes several legislative administrative procedures set in place in recent years continue to offer taxpayers an opportunity to exercise their rights to avoid unreasonable IRS audit and collection practices.
Due Process Hearing rights under IRC 6630 insure that taxpayers have the right to a hearing before any IRS levy or seizure. Judicial review of an unfavorable CDP hearing is also available in most cases. See additional due process information in the Lien and Levy section.
Mediation procedures are in place for collection and audit issues. The current environment allows for an independent third party mediator to insure that the IRS does not ride roughshod over taxpayer rights.
Post appeals arbitration is now available in some cases. Revenue Procedure 2002-44, 2006-2 C.B. 800 sets out formal procedures for arbitration.
Mediation and arbitration procedures are even available in trust fund recovery penalty matters and Offer in Compromise cases. IRS announcement 2008-111, 2008-48 I.R.B. 1224.
Rules regarding non-responsible spouses have been clearly established and become more liberal. Innocent souse relief and injured spouse relief from spousal tax liabilities have good success rates particularly when living separately or divorced. Tax Court jurisdiction exists to review an IRS denial of spousal relief.