Paul L. Caron

Wednesday, May 11, 2011

Despite Law Prohibiting It, IRS Refers to Taxpayers as 'Tax Protesters'

TIGTA The Treasury Inspector General for Tax Administration today released Fiscal Year 2011 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations (2011-30-040):

Congress enacted IRS Restructuring and Reform Act of 1998 Section 3707 to prohibit the IRS from labeling taxpayers as Illegal Tax Protesters or any similar designations. However, IRS employees continue to refer to taxpayers by these designations in case narratives. Using Illegal Tax Protester or other similar designations may stigmatize taxpayers and may cause employee bias in future contacts with these taxpayers. ...

TIGTA found that out of approximately 3.6 million records and cases, there were 38 instances in which 34 employees had referred to taxpayers as “Tax Protester,” “Constitutionally Challenged,” or other similar designations.

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I asked "Is that incidence of non-compliance statistically significant?" Thomass wrote, "No, but if 100% of those who failed to be in compliance were not disciplined I think that would be."

In fact, I am 100% certain that there has, in fact, been no discipline in connection with this supposed non-compliance. I'm waiting for the sky to fall.

Look, I hate, really hate, the way the IRS operates as much as anyone does. I promise. But even if referring to certain filers as "tax protesters" were actually against the law, this would be pretty low on the list of what the IRS does that should actually (and, ask any protester, or even a regular person who's had the pleasure) be the subject of outrage.

Posted by: Ron Coleman | May 13, 2011 1:51:41 PM

good luck getting Congress money to improve/update IRS computers.

Posted by: tax guy | May 12, 2011 5:47:36 PM

Misleading title alert...

The IRS's position that an agent referring to a taxpayer as a "tax protester" is not a violation of the law seems reasonable to me. The law seems to have been targeted at a master file designation that labelled taxpayers as "Illegal Tax Protesters," and the Service appears to have eliminated that designation.

Posted by: dh80503 | May 12, 2011 1:11:20 PM

Statistical insignificance depends upon context. Reading the linked pdf, a few points:

- The IRS has been against this rule from the beginning. The IRS refuses to accept and enforce this rule which is why the Treasury Inspector General has to comb these records in the first place.

- Despite the law/rule, 9 of 12 past reviews found the term in the IRS manual itself.

- In the 2010 review, there were 19 employees that broke the rule. In the 2011 review, there were 33. While this constitutes a limited sample, the number of employees violating the rule expanded significantly, which is especially concerning considering the government's financial position these days, and the potential temptation to demonize violators to obtain faster (and larger) judgments against them. At the very least, their (re)training methods need to be addressed.

As a side note, it occurred to me that there's been no attempt to improve the IRS software to prevent the use of the terms in question (a simple word/phrase filter should be more than enough, and would be fairly easy to implement), and considering the history and importance of the law and decision regarding these terms to the IRS, their continued negligence in this matter needs to be highlighted and addressed.

Posted by: J Beck | May 12, 2011 1:03:44 PM

Perhaps one might ask whether Congress or TIGTA should be wasting time making such determinations ?

"Tax protester" is a lot kinder than "loony", which is probably the best way to describe people who keep making these arguments, losing and going to jail or bankrupting themselves.

Posted by: JonF | May 12, 2011 9:20:57 AM

"Is that incidence of non-compliance statistically significant?"

Posted by: Ron Coleman | May 11, 2011 6:50:16 PM

No, but if 100% of those who failed to be in compliance were not disciplined I think that would be.

Posted by: thomass | May 11, 2011 11:59:00 PM

If we had rule of law, this might actually mean something. We don't have an activist right wing/libertarian judiciary so, there is no way to actually fight this sort of thing.

Posted by: Doc Merlin | May 11, 2011 11:28:28 PM

38 out of 3.6 million? Not significant.

Posted by: Montjoie | May 11, 2011 8:20:22 PM

Well, are IRS employees forbidden to quote court opinions that at use the term "tax protestor"? Virtually every case involving IRC 6673 in one way or another refers to the taxpayer as a "tax protestor" which you can see by a simple Westlaw/Lexis search of the term 6673 in a database containing Tax Court opinions (you can probably do it on the Tax Cout website itself).

If this is all about semantics, which it really is, then put out the notice far and wide to call tax protestors "tax defiers" as no one at the IRS got DoJ Tax Division's memo on this. And if you read the DoJ material it is more than semantics, it reasons that a protestor has something legitimate to protest whereas a defier is someone who defies (breaks) the law.

RRA98 was a mess of botched legislation. To this day, 13 years later, the government, the Tax Court, and the Courts of Appeal are still arguing about trivial jurisdictional matters involving 6015(f) innocent spouse relief (the please please please help me subsection). Innocent spouse and Collection Due Process consume the Tax Court's resources. In 1998, the Tax Court published over 600 memorandum opinions, none of them having to do with the new jurisdiction created by RRA98 (i.e., they were deficiency litigation). For many years, back into the beginning of the last decade, the Tax Court published(es) 300 memorandum opinions or less, and 1/3 of them deal with CDP and Innocent Spouse (leaving approx 200 deficiency cases). And most of these cases involved tax protestors.

So forgive the IRS if they use the phrase tax protestor when the courts use it on a routine basis to refer to the same (or same type of) taxpayers.

Posted by: tax guy | May 11, 2011 5:46:31 PM

The DOJ also has a bad habit of blindly referring to transactions as "abusive tax shelters" even when the character of the taxpayer's underlying transaction has nothing to do with the issue at hand. The DOJ also sometimes uses pejorative defined terms to try to sway the judge. For example, in a case where the DOJ argued that some properties had zero value, the DOJ's brief referred to the properties as "Zero Value Properties." See Shell Petroleum, ("the Government pejoratively calls them 'Zero Value Properties').

I seriously question whether these verbal games actually accomplish their purpose, and sometimes, as above, the court calls the DOJ out for its silly tactics. Of course, private litigants frequently engage in legerdemain of this sort, but I find it more irritating when our nation's representative does it.

All of that being said, most of the "tax protester" briefs are so completely egregious that the label seems to fit. Also, I don't have the statute in front of me, but I would hope that it's not unlawful to call someone a tax protester once a court has sanctioned him or her for making frivolous arguments.

Posted by: andy | May 11, 2011 3:58:19 PM

Is that incidence of non-compliance statistically significant?

Posted by: Ron Coleman | May 11, 2011 3:50:16 PM

IRS copywriters: "civility challenged"?

Posted by: Hillbilly Geek | May 11, 2011 3:45:19 PM

And I am willing to bet these IRS employees still have a job.

Posted by: Andrew | May 11, 2011 3:42:32 PM

It seems no law applies to the government any more, just us slaves.

Posted by: Bill Johnson | May 11, 2011 3:15:25 PM