Bureaucratic “RED TAPE” Endangers Cases
October 6, 2008 – 10:11 amIn December 2006, the IRS undertook the bold task of implementing the Tax Whistleblower Reward Program in response to the enactment of IRC section 7623. The IRS has created a complex set of internal controls and checks & balances to ensure that the Whistleblower Program is carried-out correctly. However, from the perspective of some, this complex set of internal controls and checks & balances can only be catagorized as harmful ”RED TAPE.” Bureaucratic RED TAPE is nothing new when it comes to the IRS. Generally, practicioners are good at patiently waiting long-periods of time for the IRS to respond to issues. However, when a Whistleblower case is at stake, waiting may not be an option. The 3-year statute of limitations on assessment is almost always an issue when a referral is made to the Whistleblower Program. Thus, the RED TAPE can seriously jeopardize a potential reward and the ability of the IRS to assess unpaid tax. I am presently involved in a case wherein the referral was made with only a few months left on the 3-year statute of limitations. My experience tells me that it takes several months for a case to weave through the maze of the Office of the Whistleblower Reward Program in Washington, DC. Thus, it will take several months before the case will be assigned to a revenue agent in the field to pursue the liability. In order to leapfrog the RED TAPE, I sent a duplicate of the referral to the local Team Manager in the locale of the taxpayer. However, following the Internal Revenue Manual, the Team Manager was forced to wait on the Office of the Whistleblower Reward Program before he could begin an audit. The 3-year statute of limitations on civil enforcement is likely blown in my case simply because RED TAPE prevented the IRS from timely seeking an extension of the statute of limitations or issuing a notice of deficiency when the opportunity was made available to the IRS. RED TAPE is an issue that the IRS and the Office of the Whistleblower Reward Program seriously needs to address. In order for the program to be successful, the IRS needs to have the power to timely pursue the good leads that are provided by Whistleblowers. The Program has received a large number of referrals. On numberous occassions, IRS employees in the Office of the Whistleblower Reward Program have told me that they are inundated with referrals. The bottleneck at the Office of the Whistleblower Reward Program is affecting the success of the Program by causing a costly delay in moving cases to the field.
2 Responses to “Bureaucratic “RED TAPE” Endangers Cases”
In December 2007 I sent in some 211’s on a tax shelter for 2004. Statute has now expired or soon will.
I was called yesterday by a doctor client with a tax question. During the conversation we got into how incompetent the people at the IRS are; my client told me about one of his patients, who is in his 80’s and works part time for the IRS in the service center in Chamblee, Ga. His patient said that his IRS supervisor told him not to work so fast, that he was making the other IRS employees look bad. Again, this man is in his 80’s.
On Monday, I called the GSU Law School low income tax assistance program, for one of my clients who may have to go to US Tax Court. I talked to a woman that works for that program; we got into problems dealing with the IRS. She said that they had had many forms and letters lost by the IRS, sometimes more than once on a single case. I have also had the IRS lose an amended return, and admit it. My client may have to go to Tax Court because of a very simple issue that we can not get anyone at the IRS to look at.
So, I can understand your frustration.
By Clayton Simmons, CPA on Oct 8, 2008
I recently spoke to Al Gibson, a representative of the Tax Whistleblower Reward Program. Al tells me that the IRS is cognizant of the delays, and the jeopardy which it causes to claims. However, Al says the IRS has decided that the potential damage from speeding-up a claim outweighs the harm in moving slowly. Specifically, the IRS is very worried about receiving tainted materials–for example, information that is subject to the attorney-client priviledge. The IRS spends an enourmous amount of time and resources having claims reviewed by its taint cadre. As Al explained to me, the IRS feels that the jeopardy caused by tainted examinations and audits outweighs the delays in processing a case. I greatly appreciate the explanation provided by Al, and I certainly see the viewpoint of the IRS. In fact, I am glad that the IRS places fairness and constitutional privilege above the collection of tax.
By Rob on Oct 9, 2008