Irs Horror Stories Prompt Public Apology Wronged Taxpayers Testify On Capitol Hill How Their Lives Were Ruined By Tax System

Taxpayers converged on Capitol Hill on Wednesday from across the United States with sagas of incompetence, laziness and hostility by the Internal Revenue Service that had shattered their lives.

Leaving no doubt about the veracity of the allegations, acting IRS Commissioner Michael P. Dolan issued a landmark apology, saying: “No one should have endured what these citizens describe as their experience at the hand of the tax system. At this point, I offer my sincere apology to these taxpayers for any mistakes we have made and for any anguish we have caused.”

In an unprecedented hearing into the abuse and mistreatment of taxpayers, the Senate Finance Committee turned a harsh spotlight on the cases of Americans who became trapped in a confused bureaucracy incapable of correcting its errors for years.

Monsignor Lawrence Ballweg, an 82-year-old priest from Florida, told of “devious” IRS agents who erroneously tried to grab $18,000 from a trust fund for the poor set up by his late mother.

Katherine Lund, a California woman, described how the IRS could not keep track of its own records, repeatedly threatening to seize her home if she did not pay the tax debt left over from a former marriage. Although on three occasions she sought to clear the debt, another branch of the agency continued to pester her.

The chilling testimony was met by profuse apologies by the committee members themselves, who struggled to grasp how the tax system had devolved into such a sorry state.

“We can’t help but to feel shame that our government has carried on this way,” offered Sen. Charles Grassley, R-Iowa.

A number of experts testified that much of the blame for the IRS’ problems was a direct result of lax oversight by Congress. Indeed, the Senate Finance Committee, the panel that has direct responsibility for the IRS, had never in its history conducted an oversight hearing of the agency.

The three-day hearing is due to conclude today when IRS agents, their identities protected by hoods, are to testify that the agency routinely violates the law and the rights of taxpayers in its efforts to boost its collections.

The hearings come at a crossroads for the IRS, with political reformers demanding that control of the agency be transferred from the Treasury Department to a special independent board. More radical solutions, such as those endorsed by House Ways and Means Committee Chairman Rep. Bill Archer, R-Texas, would eliminate the income tax, as well as the IRS, and create a new national sales tax.

IRS officials have been politically battered for more than a year, since the first disclosures that the agency’s $4 billion effort to modernize its antiquated computer systems had become a boondoggle.

But the problems described Wednesday go far beyond technology. Robert S. Schriebman, a tax attorney from Southern California, testified that in many instances the IRS’ power is too great, citing the ability of the agency to seize homes with only the signature of a district director.

Schriebman said that taxpayers should have the right to a court hearing before any lien, levy or seizure is executed by the IRS. According to the congressional General Accounting Office, the agency issued more than 750,000 liens against taxpayer property last year alone.

The IRS has effectively shielded itself from the U.S. public, using its extraordinary authority under the so-called 6103 provision of the federal tax code that was intended to safeguard taxpayer privacy, said Sen. Daniel Patrick Moynihan, D-N.Y.

Under 6103, the IRS has essentially kept its sometimes tarnished history of activities unwritten, said former IRS historian Shelley Davis. “The IRS is the best secret-keeping agency in government, better than the FBI and the CIA,” she said.

But the most damaging indictment of the IRS at Wednesday’s hearing appeared to come from the testimony of taxpayers from around the nation.

Lund drove to Washington with her current husband, Orange County, Calif., prosecutor Jim Hicks, because the couple could not afford to fly with their children.

Lund laid out her story for nearly a half hour, at times breaking into tears. She said her problems with the agency started with her 1983 tax return, in which the IRS later assessed additional taxes of $7,000. By then, however, she had divorced her previous husband and was unaware of the tax assessment.

The IRS repeatedly came after Lund to pay the bill. Although Lund paid the IRS three times, the agency would refund the money, saying she didn’t owe anything. Then, another branch would dun her again.

When she married Hicks, the IRS went after him, attempting to levy his paycheck from Orange County earlier this year. The couple finally filed for divorce, not to escape the marriage but to protect his check from the IRS, she said. The couple also nearly lost their home to an IRS lien.

The entire snafu was caused by the IRS creating a noncomputerized collection record that was never noted in its master computer file, a procedure reflecting the obsolescence of its equipment. The error was corrected only after the committee took its findings to the IRS.

“It is a disgrace to our nation that an arm of our democratic government is allowed to behave as if it were an extension of a police state,” she said.

Ballweg, the priest, said the IRS dunned him for $18,000 in taxes on his late mother’s trust fund for the poor because he had not used the correct forms in filing the trust’s tax return.

When he attempted to correct the error, IRS employees subjected him to “calloused and indifferent behavior” for eight months that did nothing to resolve the problem.

“If I treated people like that when I was a pastor, you can be sure the pews of my church would be empty,” Ballweg said.

After the committee intervened, the IRS dropped the case against Ballweg.