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Congress may tell IRS to be friendlier

Published Sep. 13, 2005

Carl Junstrom did not want to argue with the Internal Revenue Service.

The IRS claimed he owed $9,000 in overdue taxes because he had wrongly deducted the cost of his Ford van and a few bad debts.

Never mind that an IRS employee had told the Tampa appliance repairman that taking the deductions was okay. Junstrom didn't want to fight the bill because he was afraid the IRS would find some other way to make his life miserable.

So he faithfully wrote a check every month, paying $28,000 in taxes and penalties over 10 years.

That wasn't enough.

The IRS said he still owed $26,000 because his monthly payments could not keep up with the mounting penalties and interest.

"It was loan-sharking," said Junstrom, 73, who testified in January at a hearing in Orlando. "They just kept adding and adding penalties and interest. It was outrageous."

Stories such as Junstrom's have prompted the Senate to consider a bill this week that could dramatically change how the IRS operates. The 366-page bill would force the agency to be more responsive to taxpayers.

It would restrict IRS penalties and create an independent "taxpayer advocate." It even would change how the IRS is listed in your local telephone book.

But Congress still must find a way to pay for the changes. Making the IRS more friendly will cost about $20-billion in lost taxes and penalties over the next 10 years, and Congress has found only $7-billion in cuts and new fees.

The bill grew out of years of complaints that the IRS was a bureaucratic monster, unresponsive to the average taxpayer and downright rude to people it audited. At hearings last week, taxpayers described being raided by gun-toting IRS agents who broke down doors and seized records.

"IRS!" a witness said the agents shouted as they stormed the office of a Texas oil company. "Remove your hands from the keyboards and back away from the computers. And remember, we are armed!"

The image of the IRS as a bunch of jack-booted thugs was proof the agency needs to be overhauled, senators said.

"Such Gestapo-like tactics are uncalled for," said Sen. Frank Murkowski, R-Alaska. "You don't need to send in armed personnel in flak jackets."

The goal of the bill, said Sen. Bob Graham, D-Fla., "is to put the word "service' back in the IRS."

Among other things, the bill would:

+ Limit penalties. For people such as Junstrom who agree to make regular payments, the IRS would stop adding penalties once a payment plan is established. Spouses of tax cheaters would also get a break. Instead of sharing responsibility for an entire overdue bill, they would pay based on their share of family income.

+ Rein in IRS employees. The agency would keep files on complaints against workers. Employee evaluations would emphasize customer service.

+ Create new phone listings. In many phone directories, the only number listed for the IRS is a national 800-number. Graham said that "sends out a signal that says, "We don't care about you.' " The bill would require the IRS to publish its local address and phone number.

+ Stop anonymous letters. Every IRS letter would have an employee's name and phone number so taxpayers know whom to call for questions.

+ Establish a new oversight board. It would include six "citizen experts" in management, customer service, tax laws, technology and the needs and concerns of taxpayers. The bill also would empower the IRS commissioner to appoint senior staff members and reward them with bonuses when they meet performance goals.

Charles Rossotti, the new IRS commissioner, told the Senate Finance Committee last week that even though the bill had yet to pass, he was aggressively working to improve the agency.

"We have to provide better service," Rossotti said. "The abuse of even one taxpayer is one too many."

Form letters are being simplified and tested to make sure they are easy to understand. IRS employees will no longer be evaluated based on how much money they collect or how much property they seize. The agency also announced plans to clean up the Criminal Investigation Division, the branch that performs police-style raids.

Rossotti, founder of an information technology company, has been praised for his first five months in the job.

"Commissioner Rossotti has started the process," Graham said. The bill "will accelerate the pace."

The bill has tremendous support in Congress. The House version passed 426-4 and the Senate bill should win easy approval. But senators still must decide how to pay for all this friendliness.

One possibility is raising the cigarette tax. Or Congress may change tax rules on life insurance companies to raise money.

Despite all the bluster about the evils of the IRS, Congress is partly to blame for the problems. After all, Congress wrote the tax laws and gave the IRS a mandate to crack down on cheats.

"We are responsible for the tax code," said Rep. Karen Thurman, D-Dunnellon. "We wrote all 10,000 pages."

Said Sen. Bob Kerrey, D-Neb.: "We asked them to be more policelike."

But introspection doesn't last long on Capitol Hill. Both parties have relished the opportunity to attack the government's most hated bureaucracy, especially during an election year. Some say the bill doesn't go far enough.

Sen. Connie Mack, R-Fla., said he is concerned the new oversight board will not be truly independent because it will include the treasury secretary and the IRS commissioner.

"My concern is we'll pass a piece of legislation and say how great it is _ and in the end, it won't change the culture of the IRS."