Welcome To The Kinder, More Gentle IRS
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J.A.I.L. News Journal
Los Angeles - September 6, 2000
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Welcome To The Kinder, More Gentle IRS
Plundering and Blundering: The IRS
On July 30, 1996, while reluctantly signing a bill to provide meager additional protections to taxpayers, President Bill Clinton proclaimed: "We say to America’s taxpayers, when you deal with the IRS, you also have privileges and we respect them. You have protection and we will help provide it. You have rights and we will shield them."1
There may have been a few Americans who actually believed the president’s assertions. However, since Clinton took office, the IRS has seized over 12 million bank accounts, put liens on over 9 million people’s homes and land, directly confiscated more than 100,000 people’s houses, cars, or property, and imposed over 100 million penalties on people for allegedly not paying sufficient taxes, paying taxes late, et cetera.2 The IRS has also audited roughly 15 million American families and businesses--and the audit process (at least through 1998) was intentionally designed to pressure people to pay more taxes than they actually owed. The IRS has collected tens of billions of dollars in wrongful penalties and taxes not owed since 1993.3
The image of the IRS goes to the heart of Clinton’s attempt to make people think of government as a warm, fuzzy abstraction--rather than as an entity that browbeats citizens and twists arms in the name of the Greater Good. Because Clinton sees government revenue as the source of all progress and all justice, his administration continually fought to minimize the rights of taxpayers and to stretch IRS discretionary power on every front.
In 1994, after the General Accounting Office (GAO) issued a report on taxpayer abuse, IRS Assistant Commissioner Michael Dolan publicly complained: "We believe that the use of the term ‘taxpayer abuse’ is misleading, inaccurate and inflammatory."4 The IRS fiercely opposed any system to track the number of cases of taxpayer abuse. IRS Commissioner Margaret Richardson, appearing before a congressional committee in March 1995 to urge congressmen not to enact legislation to expand taxpayers rights, stated, "My hope is that the overwhelming number of taxpayers who come in contact with us will come to know us as a genteel, Gulliver-like giant."5 But, as IRS agent Jennifer Long testified to Congress in 1997, revenue agents are encouraged by IRS management to use "tactics--which appear nowhere in the IRS manual . . . to extract unfairly assessed taxes from taxpayers, literally ruining families, lives, and businesses--all unnecessarily and sometimes illegally."6
The following cases provide a baseline by which Clinton’s action and rhetoric must be measured. It is not simply that the IRS sent out a couple of wrong notices or accidentally raided a few wrong bank accounts. Clinton used all his prestige and all his chips on Capitol Hill to perpetuate the agency’s power to use and abuse the American people.
Destroying a "Classic Deadbeat Freeloader"
In 1993, Carole Ward, a 46-year-old Colorado Springs businesswoman, became incensed when, during a meeting between her son and IRS auditor Paula Dzierzanowski, Dzierzanowski began asking questions about her family’s children clothing stores that Ms. Ward felt showed gross ignorance. Ms. Ward taunted the auditor: "Based on what I can see of your accounting skills, you’d be better off dishing up chicken-fried steak on an interstate somewhere in west Texas."7
The IRS responded by seeking to impose a financial death penalty on Ms. Ward. Three weeks later, IRS agents swarmed into Ms. Ward’s three stores, proclaiming that Ms. Ward owed $324,889 in taxes. They froze her bank accounts, shut down and confiscated the stores and all their inventory, and allegedly informed some of her customers that Ward was suspected of drug smuggling. The IRS even sought to seize the house owned by Carole Ward’s 74-year-old mother, claiming that it was somehow related to her daughter’s tax dodging.
Prior to the seizure, the IRS had made no finding that either Ms. Ward or other family members who co-owned the stores owed any taxes. The IRS violated federal law by seizing the assets without first formally giving her a notice of deficiency of taxes--especially since the IRS had no reason to suspect that Ms. Ward would load up her clothing stores and flee to Rio de Janeiro.
Ms. Ward hotly denied that she owed any taxes and demanded that the IRS audit her. After the examination--which covered seven years of Ward’s tax returns--the IRS concluded that she owed only $3,400 in additional taxes--barely 1 percent of the amount they had already confiscated. However, before the agency would accept her $3,400 check and return her confiscated assets, the agency insisted that she sign a statement promising not to sue the IRS for violating her rights. Ms. Ward’s stores offered specialized children clothing, including white baptismal gowns. The seizure occurred shortly before Pope John Paul II came to Denver in 1993, and an IRS official told Ms. Ward that if she "played ball," the IRS would return her merchandise in time for the pope’s visit.8
Ms. Ward refused to sign such an agreement, complaining that "you don’t have to surrender your constitutional rights in order to pay your taxes." After Ward publicly protested the IRS’s treatment of her, IRS District Director Gerald Swanson and an assistant spoke on a Colorado Springs talk show and illegally disclosed information from her tax return. Ward called up during the talk show to dispute the officials’ allegations that she still owed $324,000, despite the fact that the agency had determined her tax bill to be a tiny fraction of that amount. According to Ward, an IRS official called her lawyer after the program and shouted: "If that bitch wants to play hardball, we will show her what hardball is! She will never get her stuff back unless she signs the document" promising not to sue the agency.
Eventually, the IRS relented and took her check. After Ms. Ward continued publicly complaining about the IRS abuses, IRS officials sought to vilify her by repeating the same accusations against her that the IRS had originally made, and that had already been discredited by the IRS’s audit of her returns. IRS agent James Scholan, who participated in the raids shutting down Ward’s stores, wrote a letter to the Colorado Springs Gazette declaring that people like Ward and her son "are the biggest problem our society faces" and denounced her as a "classic deadbeat freeloader." IRS officials also illegally disclosed information from Ward’s tax return to the television program Inside Edition.
Five months later, the IRS returned about 75 percent of the merchandise it had seized. Ward complained: "They took almost $3,500 out of the stores’ cash registers and they gave us receipts for it--and they have never applied it to taxes or given it back to us. They gave us back three stores full of summer clothing just in time for Christmas."9 Thanks to the IRS’s actions and allegations, Ward lost her lease at one store.
Ward wanted her day in court, but because her finances were exhausted by the initial seizure and struggle to get her business back on its feet, and because of statutory limitations on legal fees for winning parties, she could not afford to hire a lawyer until after the statute of limitations had expired for the wrongful seizure. Eventually, she sued the IRS for wrongful disclosure of her personal tax information.
On June 2, 1997, federal judge William Downes slammed IRS agent Scholan for acting with "reckless disregard" for the law. Downes concluded that evidence offered at trial showed that the IRS’s "wrongful conduct" caused Ms. Ward’s "personality to change. She became bitter and consumed by a battle with the IRS in an effort to establish that what IRS agents and employees had said and done was incorrect."10 The judge awarded Ward $325,000 in compensatory and punitive damages and warned the IRS that "reprehensible abuse of authority by one of its employees cannot and will not be tolerated." Downes decreed: "The conduct of our Nation’s affairs always demands that public servants discharge their duties under the Constitution . . . with fairness and a proper spirit of subservience to the people whom they are sworn to serve."11
The Justice Department filed a motion to deny attorneys’ fees to Ward’s lawyers and, as Denis Mark, Ward’s lead trial counsel, observed, "If the government chooses to file an appeal, this case might be dragged out for many more months or years."12 Of the three agents whom the judge found violated Ward’s rights, one has retired, one is still on the payroll in the same position, and the third has been promoted to chief of IRS collections for the state of Colorado.
Bob Kammen, a Phoenix tax attorney and a National Taxpayers Union counsel, observed, "The unfortunate aspect of the Carole Ward case is that it gives people the mistaken impression that there is some actual recourse--you have to assume that for every case like that where there are damages awarded, there are 50 to 100 problem cases where the advice to the client is: you cannot afford to take on the federal government."13 Even in the rare cases in which judges award damages to victims of an IRS abuse, the Justice Department is renowned for using every possible legal stratagem to see that the person never collects a dime.
Ward commented in 1998 that "the fact that I won in court does not remedy the fact that my entire family has been bankrupted and destroyed."14 And she was contemptuous of congressmen who seem more concerned about having their picture taken with her than about curbing the IRS’s power.
[Many other accounts to numerous for this email -- snip]
Chapter 3 Notes
1. "Remarks on Signing the Second Taxpayer Bill of Rights and an Exchange with Reporters," Public Papers of the Presidents, July 30, 1996, p. 1375.
2. Internal Revenue Service, Annual Reports, 1993-99.
3. U.S. General Accounting Office, Report of the IRS Oversight Commission.
4. Greg Pierce, "IRS Says It’s Not Guilty of ‘Abuse,’" Washington Times, October 28, 1994.
5. "Prepared Statement of Margaret Milner Richardson, Commissioner of Internal Revenue Service, Before the Subcommittee on Oversight, House Committee on Ways and Means," Federal News Service, March 24, 1995.
6. "Testimony of Jennifer Long, Senate Finance, IRS Treatment of Employees and Taxpayers," Federal Document Clearing House, September 24, 1997.
7. Author interview with Carole Ward, April 11, 1998.
8. Author interview with Carole Ward, April 10, 1998.
10. "Business Woman Is Awarded $325,000 for IRS’s Unauthorized Disclosures. (Carol Ward v. United States) (No. 95-WY-810-WD)," Tax Notes Today, June 6, 1997.
12. Author interview with Denis Mark, April 10, 1998.
13. Author interview with Bob Kammen, October 8, 1997.
14. Author interview with Carole Ward, April 12, 1998.
[Eighty-nine footnotes total] *Email: WaltMaken@...
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