of honoring form rather than substance is woven through If any investigation was carried out, it was within Referring to Mr. Eggers' statement about my being detained or held overnight: I was arrested after I identified myself to two special agents of the IRS. May I remind you that affidavits by witnesses to my false arrest and imprisonment were submitted to the Committee on May 10, 1982. If you were aware of all of the people involved in this false arrest, you would find it difficult to believe Mr. Egger's tale of not knowing what that is about. If you will investigate diligently, you will find out it was another high-handed attempt by the IRS to scare the public into believing that it's unsafe to attend a public trial. I have submitted affidavits, made under oath; has the IRS submitted any affidavits in justification of their acts? Chairman Rangel, I have a question concerning what you said directly after Mr. Egger's testimony about me. You said, "And we will receive that information and forward it to Mrs. Hanson..." When will you forward this information to me? I am very interested in this. I am also very interested in the answers you assured Mr. Graham, one of the witnesses on April 26th, he would receive. He asked questions of Congress, such as: What is an income tax liability? Where is it in the IRS Code? Am I a person required to file? etc. When will we all be able to receive the answers to those questions? When will I receive my copy of the hearing? I was promised and promised and promised a copy of the hearing by I don't know how many people on the staff of the Oversight Subcommittee. Yet I do not have a copy of the hearing. A letter from Congressman Philip M. Crane dated June 9 informed me that the original printing of the report has run out quickly. There will be another six weeks' delay. I was promised a copy as soon as it was printed! In the Liberty wherewith Irene Hession Irene C. Hanson 2 11-243 O 83 17 Chairman RANGEL. Just 1 minute. I just want to make certain that the IRS is familiar with your case. Mrs. HANSON. Why won't they be? I sent it to them. Chairman RANGEL. If for any reason the Internal Revenue Service indicates that they don't have sufficient Mrs. HANSON. Well, they sent letters back. I would assume, then, that they got the affidavits. Chairman RANGEL. I assume that you are right, but if they tell us that they don't, you can rest assured that we will then contact you to get whatever additional information we need. Mrs. HANSON. I want you to. Chairman RANGEL. And we will be responding to you. Mrs. HANSON. Will you actually investigate everything that they have done to my husband, to me? Chairman RANGEL. We will look into the case of both your husband and yourself. Mrs. HANSON. I have given you the authorization. I don't want any paper left over in their files. I want you to see it all. Chairman RANGEL. Perhaps the first question I would ask of the next witness is whether or not the Commissioner would have any problem in doing this, in view of the fact that you have questioned this. Mrs. HANSON. OK. Chairman RANGEL. Thank you very much. Would the Internal Revenue Service now need a recess? Twenty minutes, would that be sufficient? We will recess until 25 minutes to 2. [Brief recess.] Chairman RANGEL. The committee will resume its hearings. Welcome, Commissioner Egger. You assumed your responsibilities at the same time that I assumed the chair of the Oversight Committee, and I want to thank you for the cooperation that you have extended to this committee in the past as we try to fullfill our responsibility of providing oversight. You have heard some of the cases this morning that we as Members of Congress have been receiving from individuals and organizations, and it is the Chair's hope as we find more and more people avoiding the voluntary tax system that perhaps through your office and your ombudsman that we can provide some type of a communication between frustrated citizenry and their Members of Congress and your office. In order to give credibility to the system, of course, we must be able to get honest answers, quick responses to allegations that are made. I am certain you will not deny that human failing does not exclude the Internal Revenue Service, and that you probably do and should want to know not just where violations are committed by employes, but where it is perceived by individuals and communities that violations have been committed. Further, I think that as long as this committee is assured that the mechanism is set up where we can follow through on these demands being made on the members and on the committee, that we can do a great deal without going to the Congress for additional legislation in improving on that procedure. Maybe Mr. Duncan, who has a deep interest in this, might have something to add. Mr. DUNCAN. I wondered if we were going to get into possible questions. Chairman Rangel. I would assume that the Commissioner would like to respond first. Mr. DUNCAN. I would like to reserve my right. Commissioner, welcome to the committee. STATEMENT OF ROSCOE L. EGGER, JR., COMMISSIONER OF INTERNAL REVENUE, AND HAROLD BROWNING, TAXPAYER OMBUDSMAN, INTERNAL REVENUE SERVICE, ACCOMPANIED BY DONALD BERGHERM, ASSOCIATE COMMISSIONER FOR OPERATIONS, ROBERT REBEIN, ASSISTANT COMMISSIONER FOR INSPECTION, WARREN HARRISON, CHIEF OF OPERATIONS, CRIMINAL INVESTIGATION DIVISION, AND JOHN SPARKS AND DONALD TEMPLE, SPECIAL AGENTS Mr. EGGER. Thank you very much, Mr. Chairman. First let me say that I am pleased to have the opportunity to be here. You have provided a mechanism through which these allegations of complaints can be aired, with an opportunity on our part to respond to them to the extent that we can do so without violations of the Privacy Act or the Internal Revenue Code provisions on privacy. First let me introduce the people here at the witness table with me. Harold Browning is the IRS Taxpayer Ombudsman. Mr. Browning will have a separate statement of his own after I have concluded my testimony. Donald Bergherm, on my right, is the Associate Commissioner for Operations. We have a number of other Service officials here who could be available for any in-depth discussions that might be appropriate as the occasion arises. In my prepared statement, which was made available to the subcommittee, the media and the general public earlier, I went to great lengths to describe the details of IRS safeguards for taxpayers' rights, with particular attention to our examination, collection, criminal investigation, and inspection functions. Chairman RANGEL. That full statement will appear in the record, Commissioner. [The statement of Mr. Egger follows:] STATEMENT OF ROSCOE L. EGGER, JR., COMMISSIONER OF INTERNAL REVENUE Mr. Chairman and Members of the Subcommittee, I am pleased to be with you today for this oversight hearing into the Internal Revenue Service's systems for safeguarding taxpayers' rights. We appreciate this opportunity to put forth the Service's position on such an important issue, and we hope to demonstrate to your satisfaction that the Service gives a high priority and attention at all levels of the organization to safeguarding taxpayers' rights. Accompanying me today are Harold Browning, the Taxpayer Ombudsman, who will have a separate statement to present at the conclusion of my testimony; Don Bergherm, Associate Commissioner for Operations; and Bob Rebein, the Assistant Commissioner (Inspection). Other Service officials also are available for in-depth discussions of their specific program areas if necessary. ROLE OF SAFEGUARDS IN VOLUNTARY COMPLIANCE Before going into the details of our safeguards, I would like to provide some background on the way the Service views this area. This is important in order that we maintain an appropriate perspective on this issue. No one is really going to disagree that collecting taxes is perhaps the most unpopular function of government. The annoyance felt by most people as they prepare and submit their tax returns, coupled with the sentiment that the taxes themselves are too high, combine to reinforce this unpopularity. At the same time, however, I think we can all agree that collecting taxes is perhaps the most important function of government. In fact, without the revenues so collected, all functions of government would ultimately grind to a halt. Believe me when I tell you that the Service knows full well how important voluntary compliance is to the success of our tax administration system. We simply cannot operate without it. We are well aware that the extent of that voluntary compliance and therefore the success of our system-rests to a large degree on taxpayers' perceptions of the fairness and equity of tax administration. In our role as the administrators of the system, we make every effort to insure the continual presence of that fairness and equity in all aspects of our operations, but particularly so in the area of taxpayers' rights. We will never knowingly take any action which would undermine taxpayers' rights and the voluntary compliance system. Of course, it would be foolish to say that mistakes do not occur. With total staffing of over 85,000 in fiscal year 1982, and anticipated personal contacts of all types with nearly 50 million taxpayers, the likelihood of occasional errors is obvious. The fact that personal judgment on the part of our employees is required in most, if not all, taxpayer contacts-such as providing assistance, examining returns, collection delinquent accounts, investigating possible criminal violations, etc.-is certainly a factor present in the prospect for errors. Add to this the known complexity of the tax law, and the processing of nearly 167 million returns of all types in fiscal 1981, as well as issuing more than 71 million individual refunds, and the scope of our problem becomes clearer. This organization simply has too many contacts with the public-too large a "social presence," if you will-to expect it to maintain a perfect record. I imagine large organizations in both the public and private sectors all share this problem. None of this is meant as an excuse, however. The Service has a commitment to all taxpayers to safeguard their rights in the system, and we constantly strive to improve our record in this respect. OVERVIEW OF IRS' SAFEGUARDS We believe the system of safeguards currently in place is working well to protect taxpayers' rights. As I noted earlier, there will always be isolated instances of perceived abuse in an organization as large and diverse as this, but our system includes provisions for correcting these. We take it as an obligation to the taxpayers-who pay our bills too-to constantly monitor our system and improve upon it. The first step in protecting taxpayers' rights is to prevent abuse. For this reason, our system includes operating policies and procedures which establish both internal and external controls on operating units. Perhaps the Service's most visible safeguards are the existence of the Taxpayer Ombudsman and the Problem Resolution Program. Mr. Browning will cover these areas in this testimony. I would now like to briefly describe some of the most important precedural ways in which our systems are designed to prevent abuses. All the procedures I will note are contained in the Internal Revenue Manual, the Internal Revenue Code, or other official documents. Additionally, they are made known to taxpayers verbally and in a number of IRS publications, copies of which have been provided to the Subcommittee staff. 1. Examination division In examining returns, the Service makes every effort to correctly apply the tax laws enacted by the Congress, to determine the reasonable meaning of various code provisions, and to perform audits in a fair and impartial manner with neither a Government nor a taxpayer point of view. By law taxpayers are required to produce records to substantiate amounts shown on their tax returns when requested. However, taxpayers have the right to expect that the time and place of the examination be reasonable. When we decide to examine a particular return, we notify the taxpayer in advance of the time and place of audit. Also we notify the taxpayer in writing of verbally what items on the return are being examined and/or what records need to be furnished. Should the taxpayer be unable to keep the scheduled appointment, we make every effort to work out another date or place convenient to the taxpayer. In all examination proceedings, taxpayers have the right to have someone accompany them or legally represent them. Should taxpayers elect to have legal representation, we require that the taxpayers give their representatives a power-of-attorney covering the specific return(s) under examination. This requirement exists to protect the taxpayers' rights during any Service proceeding, and to protect against unauthorized disclosures of tax return information. Sometimes, taxpayers do not appear for the examination and/or do not produce all the necessary records. When additional requests to appear and/or produce the records do not provide results, we have two alternatives. First, if an expense item is questioned, we may disallow unsubstantiated amounts and recompute the tax based upon the best available information. Or, if additional information is absolutely necessary to determine the additional tax, we may summon the records. When a summons is issued to a taxpayer or a third party and it is not complied with, a district court must rule on the enforceability of the summons, thus providing another safeguard. In most instances, taxpayers do turn over the records necessary to complete the audit without the need for a summons. Proposed tax liability changes resulting from the examination are discussed with the taxpayer. In all cases, our procedures require that the taxpayer be informed about why the change is proposed and that he or she can appeal any unresolved examiner findings within IRS or to the courts. If the taxpayer and the Service cannot agree, a formal notification of the proposed tax change is sent to the taxpayer. This notification informs the taxpayer of the specific changes in the liability and that he or she has 90 days to appeal to the court for a review of the findings. 2. Collection Division In collecting taxes, the Service makes every effort to be fair and impartial, and has several policies, procedures and controls in place to accomplish this. I would like to focus on IRS' procedures for using levies and seizures because these tools can have the most substantial impact on the taxpayer. "Levy" refers to attachment of a taxpayer's assets in the possession of third parties, such as bank accounts and wages. "Seizure" refers to our seizure of a taxpayer's assets in his or her own possession, such as an automobile, business equipment, or building. During fiscal year 1981, the Service in disposing of 2.2 million delinquent accounts used its levy power about 740,000 times and its seizure power about 8,800 times. The Service can levy or seize a delinquent taxpayer's property if assessed taxes are not paid within 10 days after notice and demand for payment. However, our procedures are designed to give the taxpayer a reasonable chance to voluntarily settle the tax liability before these more drastic enforcement actions are started. First, one of our service centers normally sends four notices to an individual taxpayer (three to businesses) over a 3-month period. After this, if payment has not been forthcoming, and we have had no other contact with the taxpayer, the account is sent to a district office where further attempts are made to contact the taxpayer. Publications explaining the collection process, as well as what the taxpayer's rights in the process are, are automatically mailed to the taxpayer along with the second tax delinquency notice. We inform the taxpayer in the final mailing notice that if payment is not received within 10 days or if the taxpayer does not contact an IRS office, enforced collection-levy or seizure-may be taken. While some levy actions may be taken without further contact with taxpayers, we usually attempt to contact the taxpayers by telephone, field visits, or further correspondence to work out alternative ways to pay the tax delinquency before we levy taxpayers' salaries or wages or seize their property. Also, when levies on wages and salaries and seizures are considered, procedures require us to attempt to notify the taxpayers in person that seizure will be the next action taken by IRS. We have established more controls over the use of seizures than levies. Generally, we do not require written supervisory approval before levy; however, before the seizures are made we require written approval by at least a group manager. On a residence, the next highest level of management approval is required. Also, once seizure action is initiated, the cases are controlled and reviewed for procedural compliance by a special procedures staff within the Collection Division. Before our revenue officers can enter private premises, they must have either the written permission of the taxpayer or a writ of entry from a district court. |