TIGTA Report on "Illegal Tax Protester" Designations

[LPC]

The Treasury Inspector General for Tax Administration has released its 2010 report on IRS compliance with section 3707 of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998, which prohibits the IRS from labeling taxpayers as "illegal tax protesters" or any similar designations.

The TIGTA summarizes its own findings and recommendations as follows:

WHAT TIGTA FOUND

The IRS has not reintroduced past Illegal Tax Protester codes or similar designations on taxpayer accounts. In addition, IRS publications and the Internal Revenue Manual no longer contain any Illegal Tax Protester references. However, TIGTA found that out of approximately 80.6 million records and cases, there were 196 instances in which 163 employees had referred to taxpayers as “Tax Protester,” “Constitutionally Challenged,” or other similar designations in case narratives on the computer systems analyzed.

The IRS did take the positive step of modifying the Integrated Collection System so that prohibited protester designations could not be entered into case histories. This is significant because this system has historically accounted for a large number of the exceptions TIGTA identified in prior reviews. The IRS should be commended for taking this action to protect taxpayer rights.

WHAT TIGTA RECOMMENDED

TIGTA made no recommendations in this report.

In their response to the report, IRS management disagreed that the references listed in the report are potential violations. However, management continues to discourage employees from using such designations when referring to taxpayers.

TIGTA continues to believe the use of Illegal Tax Protester, or similar designations, may stigmatize taxpayers because electronic case narratives are available to other IRS employees for future reference and may affect the opinions and actions of employees working cases.

The full report can be found here as PDF or or here as HTML.

[Nikki]

And how much money and time did TIGTA spend to identify 196 questionable violations?

Such a thoughtful allocation of resources.

[webhick]

Constitutionally Challenged...I like that.

[.]

Constitutionally Challenged

A nice touch. Applicable to some of them. I prefer "Insane moon-bats."

Seriously, as a hard-core conservative, I've never had a problem with the government calling miscellaneous delusional idiots and morons any damned thing they want to call them. TPs or deniers or lunatics or whatever.

Makes no difference, they are what they are. The general public has an interest in making sure that public employees don't get carried away with labels that don't apply, but a TP is a TP is a TP, in all their various ridiculous forms and flavors. There's no good reason not to call a TP exactly that in the interest of enabling the rest of the bureaucracy to be aware of who and what it is dealing with.

What's the alternative? A bunch of euphemisms? No doubt cooking up and enforcing the use of them will waste a few more million bureaucratic dollars.

That we are now wasting piles of money on audits of the federal bureaucracy so that TIGTA can confidently reassure us that very few of these idiots got labeled as precisely what they actually are within the federal bureaucracy is ludicrous. Beyond the fact that it's all totally counterproductive, who in the hell cares what we call them? Why are we spending a dime on this TIGTA audit nonsense?

The good news is that the federal courts can call TP idiots whatever they damned well please, can label their arguments as frivolous, and can sanction them for their frivolity, and often do.

[Judge Roy Bean]

...
The good news is that the federal courts can call TP idiots whatever they damned well please, can label their arguments as frivolous, and can sanction them for their frivolity, and often do.

As it should be. The determination of their status as violators of the law rests with the judiciary. Until they're tried and convicted of a crime, an IRS employee shouldn't have the authority to permanently apply a scarlet letter in a file somewhere, especially one the taxpayer isn't aware of and can't get corrected.

I'm confident there are ways these individuals are tracked by those responsible for enforcing the law.

[The Observer]

What is not being remembered here is why TIGTA has to conduct these audits. As LPC points out, RRA '98 made it against the law for the IRS to label taxpayers as tax protestors or to apply any other such descriptor. Congress felt that the IRS, by allowing an official label of "ITP" (illegal tax protestor) to appear on transcripts was akin to putting these people into a category where they received treatment different than other taxpayers; by doing so, the tax protestor had no avenue to rebut or appeal the categorization - especially if the tax protestor had reformed their ways or if the label had been applied in error.

And when you think about it, the IRS should treat tax protestors no different than any other taxpayer who fails or refuses to file or pay returns.

TIGTA has no choice but to conduct this audit to ensure that the law is being followed. If you are upset that this appears to be a waste of time, guess what? TIGTA conducts a number of audits across the IRS looking into a number of things, some that appear to be as trivial as whether the mailing machines in the Service Campuses are operating correctly and not stufffing several taxpayer notices into one envelope and addressed to the wrong taxpayer. Given the fact the IRS was notoriously corrupt in the '50s, as a hard-core conservative myself I would much prefer that the IRS is monitored and kept on the straight and narrow rather than watch it become corrupt again and start preying on people.

Does TIGTA get it right 100% of the time? No. It is a falliable agency just like all the rest. But I suspect that complaints about what it does with its budget and time have more to do with whose particular ox is being gored at the time rather than whether an audit of a program or policy is a waste of time.

Yeah, I know - we are talking about tax protestors who don't give a damn about the law, ethics or good citizenship. And it is very easy to jump to the mindset that since they occupy the lower rungs of our society's ladder we don't need to extend any normal rights to them. But we have to - and need to do so. Otherwise, we move down the ladder to their level.

[.]

Right. My point remains that RRA '98 with its silly constraints on calling a spade a spade is a joke.

For which we pay millions of dollars so we can know that it kinda, sorta, maybe, sometimes usually works. Totally useless, just like most of what government does. What else is new?

I mean, what are the consequences of being unfairly labeled? The numbers on your return are what they are. They're either accurate or they're not. If you attached a bunch of TP crap to your return, or filled in zero where your W-2 or 1099 income belongs, the return belongs in Ogden. If not, who cares if it's in Ogden?

IIRC, some of the people who testified at the hearings about supposed egregious violations against them prior to the enactment turned out to be full of it. Sort of like TPs and their incessant whining about CDP hearings where they want to contest their liability and/or record it but can't, and they (those who testified back in '98) got taken at face value.

And now we waste money on this crap.

[The Observer]

You are only considering one side of the question.

I mean, what are the consequences of being unfairly labeled?

How about the possibility that you were not a tax protestor, an issue came up on your return and some idiot at Ogden decided to classify you as a TP merely because they didn't like your correspondence trying to address their mistake? Can we try to imagine how long it would take you to straighten that mess out with the underpaid workers at the campus? And what would you have to endure during the meantime if your case wends it way out to some IRS office for collection simply because no one decided they were going to pay attention to a tax protestor trying to con them into believing that they don't owe? Or trying to convince them that they are not a TP? "You want to know how to get that label off? Tough, we don't have a procedure for that - you are stuck with it."

And how would you feel when a revenue officer gets your case and decides to immediately file the notice of lien just because he or she saw the ITP label on your assessment and figured they might as well get it done now before they have to deal with you? Don't scream about wrongful filing of the notice of the lien at this point - the assessment is valid and unpaid at this point, so they are legally in the clear at this stage of the game.

A lot of aggravation up to this point, not to mention a damaged credit rating. You might be wishing that someone was overseeing IRS workers and making sure that the TP label wasn't assigned on a whim.

And what about the TP who decides to come in from the cold and straighten up? How does he get those scarlet letters off him?

[wserra]

And now we waste money on this crap.

I'm shocked, I tell you. Shocked.

(Also a week into a vacation into some beautiful boonies, with very limited connectivity.)

[.]

Can we try to imagine how long it would take you to straighten that mess out with the underpaid workers at the campus?
...
Or trying to convince them that they are not a TP?
...
And how would you feel when a revenue officer gets your case and decides to immediately file the notice of lien
...
And what about the TP who decides to come in from the cold and straighten up?

Aren't those examples of the kinds of stuff that the Taxpayer Advocate Service was set up to handle?

[The Observer]

Were they handling them prior to RRA '98? Apparently not, so the law got passed. So now there is no need for the Taxpayer's Advocate Office to intervene since labeling of TPs is verboten.

And for what it is worth, the TAO doesn't have a lot of authority and power to undo everything that the IRS does. As I stated above, once an assessment has gotten onto the books, the revenue officer only needs verify that the assessment has arisen by procedures and then its open season for the notice of lien filing. The TAO cannot undo that. And in the event of levies attaching wages and bank accounts, the taxpayer is going to have to demonstrate either hardship or outright proof that the assessment is wrong before TAO can intervene and stop the levy. I am sure you will readily agree that this is not a process that is completed with one 5-minute phone call.

[Kimokeo]

http://www.irs.gov/newsroom/article/0,, ... 70,00.html

"The report expresses continuing concern that IRS collection practices emphasize collection of past-due liabilities even where doing so inflicts unnecessary or disproportionate harm on taxpayers and jeopardizes future tax collection. “The conventional wisdom seems to be that more hard-core enforcement actions like liens and levies mean more revenue,” Ms. Olson said. “But the data don’t bear that out. Since FY 1999, the IRS has increased lien filings by about 475 percent and levies by about 600 percent, yet inflation-adjusted revenue raised by the IRS Collection function has actually declined by about seven percent over that period.”

Lien filings can badly damage a taxpayer’s financial viability because lien filings appear on credit reports, causing the taxpayer’s credit score to drop an average of about 100 points immediately and causing lasting harm because they typically remain on the taxpayer’s credit record for at least seven years. Many employers, mortgage companies, landlords, car dealerships, and credit card issuers check credit reports, so the filing of a tax lien can adversely affect the taxpayer’s ability to obtain and retain a job, purchase a home, rent an apartment, or obtain credit generally. Accordingly, a lien filing may reduce the taxpayer’s income or increase his expenses, thereby impairing his ability to pay tax in the future. Last year, the IRS filed nearly one million liens against taxpayers.

The report also notes that the IRS has issued at least four public statements over the past year-and-a-half pledging to assist financially struggling taxpayers who are having difficulty paying their tax bills. Yet the number of liens and levies has continued to rise, the number of offers-in-compromise the IRS is accepting is near an all-time low, and there is little evidence the IRS is changing its collection practices.

After publication of her 2009 Annual Report to Congress, Ms. Olson issued several Taxpayer Advocate Directives to the IRS on lien issues, including directives (i) to discontinue its policy of automatically filing tax liens in cases where the IRS has determined that the taxpayer’s account should be placed into “currently not collectible” status based on financial hardship and (ii) to require managerial approval for the filing of liens in cases where the taxpayer owns no assets. She has also urged the IRS to expand the availability of the offer-in-compromise program for financially struggling taxpayers who cannot reasonably pay their tax debts in full.

In response to these concerns, the IRS has convened a senior-level task force to conduct a comprehensive review of collection practices. Ms. Olson writes that she appreciates the IRS’s willingness to examine the issue. However, she remains concerned that it will take years to conduct the comprehensive review, and that in the interim, the IRS will continue both to damage taxpayers’ credit ratings and to undermine long-term tax compliance without any significant revenue gains to show for their actions. Accordingly, IRS collection practices will remain a key area of focus for TAS in FY 2011.


The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is submitted mid-year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the ten tax issues most frequently litigated in the courts, and make administrative and legislative recommendations to resolve taxpayer problems."

[Cathulhu]

The entire message of the training all IRS people were put through after the bill was "don't describe the taxpayer, describe the behavior." Compared to a PDT indicator on your file, that's not all that exciting anyway. Most actual tax deniers are low income and not worth a Revenue Officer's time. But Potentially Dangerous Taxpayer is a code that goes on your file when you like to make threats about killing, shooting, or harming any Feds you see. Depending on the threat, a U.S. Marshall will bust your ass and you'll do time. I've seen it, 'nuff said.

[Famspear]

The entire message of the training all IRS people were put through after the bill was "don't describe the taxpayer, describe the behavior."

That's a good message.

......But Potentially Dangerous Taxpayer is a code that goes on your file when you like to make threats about killing, shooting, or harming any Feds you see. Depending on the threat, a U.S. Marshall will bust your ass and you'll do time. I've seen it, 'nuff said.

Speaking of which.....

viewtopic.php?f=8&t=6159

Bob Hurt isn't naming any specific names, but his rhetoric concerns me. If he's not making threats, he's coming pretty darn close.

[Cpt Banjo]

Keep a safe distance from any banjo-playing locals.

The banjo is the Rodney Dangerfield of the stringed instrument world -- it don't get no respect, I tell ya. The detestable stereotypical image of banjo players conveyed by the Deliverance film is partially to blame.

Having said that, I admit to owning a T shirt the back of which reads, "Paddle faster -- I hear banjo music!" (It was a gift)

[The Observer]

-- it don't get no respect, I tell ya

That and bagpipes. I have a dream someday of forming a marching band consisting of only these two instruments.

[Judge Roy Bean]

The banjo is the Rodney Dangerfield of the stringed instrument world -- it don't get no respect, I tell ya. The detestable stereotypical image of banjo players conveyed by the Deliverance film is partially to blame.

Having said that, I admit to owning a T shirt the back of which reads, "Paddle faster -- I hear banjo music!" (It was a gift)

Having had the completely serendipitous opportunity to pick guitar along with none other than Steve Martin years ago I hereby defend the banjo in the hands of a master. (It's a long story and like everyone else there, I was stunned.)

Equally odd, my first exposure to playing in a group with someone who could actually do what should have been done with the instrument was an attorney who somehow (I can't recall now how) acquired one that at one time had been on display in the Smithsonian.

Those two experiences have always reminded me that first impressions are nothing to rely on.

[Famspear]

Having had the completely serendipitous opportunity to pick guitar along with none other than Steve Martin years ago I hereby defend the banjo in the hands of a master. (It's a long story and like everyone else there, I was stunned.)

And, hey, what about folks like Béla Fleck and Tony Trischka? Steve Martin has played with those guys.

I remember the first time I ever saw Steve Martin on TV; it must have been on the Johnny Carson show (Tonight Show) in the 1970s. He stood there and did this hilarious routine while holding the banjo, and naturally I assumed that the banjo was just a prop. Then at the end of his monologue, he lit into the banjo. Wow.

Here's Steve Martin with Tony and Béla, on the Letterman show, doing a tune Steve composed, called "The Crow":

http://www.youtube.com/watch?v=1jn3KCZEqxc

EDIT: And check out "Big Country" from Béla Fleck and the Flecktones:

http://www.youtube.com/watch?v=q50xzhDO9lI

Trivia: One of the members of the Flecktones has had his own tax problems: Roy Wooten ("Future Man"):

http://en.wikipedia.org/wiki/Future_Man

[Famspear]

Having had the completely serendipitous opportunity to pick guitar along with none other than Steve Martin years ago I hereby defend the banjo in the hands of a master. (It's a long story and like everyone else there, I was stunned.)

Come on, JRB, we wanna hear some details!

[grixit]

So-- after the show did you and he get small together?