IRS Collection Agents Use Illegal Tactics

IRS Collection Agents Use Illegal Tactics

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Far too often when an unrepresented taxpayer speaks to an IRS collection agent the agent lies to him by making one or more of the following statements:

  • You must pay the debt or you will be criminally prosecuted
  • If you don’t pay the debt in full within so many days, your assets will be seized
  • It’s a waste of money to hire an attorney

The outrageousness of these statements is difficult to fully articulate, but I will try.

First, IRS officers are employees of the federal government and, therefore, have a duty to act in its and not the taxpayer’s best interests. That fact alone should preclude them from giving taxpayers substantive advice about the legality, validity or disputability of an IRS proposed or final assessment.

Second, even if there were no such obvious conflict of interest, these IRS officials are wholly unqualified to give legal advice to taxpayers. They aren’t lawyers, CPAs, or IRS Enrolled Agents and in the great majority of cases lack a substantial background and education in the intricacies of federal tax law.

Third, the taxpayer bill of rights gives taxpayers the unrestricted right to be represented by counsel. When an IRS official tells a taxpayer – especially an obviously frightened and unsophisticated one – that hiring an attorney is a waste of money and time, she has single handedly emasculated that right.

I and many other tax lawyers and CPAs have filed written complaints against IRS officials who have illegally advised taxpayers not to hire counsel. These complaints seem to have fallen on deaf ears, as I still frequently encounter taxpayers who have been so advised.

Last Friday I encountered yet another instance of IRS misconduct:

My client is a high school dropout who ran a modest landscaping business. He operated the business in the corporate form. The corporation and the business have been inactive for more than two years. The corporation has no assets and had distributed no assets to its shareholders. It owes $3,900 in delinquent payroll taxes.

No trust fund penalty has been assessed against my client.

The IRS issued a Notice of Intent to Levy to the corporation and mailed it to the taxpayers home. The taxpayer, understandably frightened by the threatening tone of the letter, immediately called the IRS to inquire about the matter.

In order to get my my nervous, frightened and undereducated client to pay the corporation’s tax debt in full, the IRS clerk who answered the phone made these three false statements:

  1. If he didn’t personally pay the tax debt of his corporation, the IRS could seize his personal assets¹
  2. If he didn’t pay the tax in full, he could be criminally prosecuted²
  3. He should not hire an attorney because, a) an attorney wouldn’t be able to help him; and b) the money he would spend on attorney would be better used to pay the IRS debt

The clerk’s first two pieces of erroneous legal advice give the lie to the third. The very reason my client needed an attorney is because IRS officials like this one regularly misstate the law and give advice that they are unqualified to give, that is in no way designed to benefit the taxpayer, and that is in every way designed to benefit the IRS.

Footnotes:

¹  The IRS cannot legally seize a shareholders’ personal assets to collect a corporation’s debt. If it wants to pursue collection from an individual other than the primary debtor (i.e. the corporation) it must first propose a trust fund assessment penalty against allegedly responsible persons giving them an opportunity to dispute the proposed assessment.

²  It is conceivable, and maybe even likely, that a taxpayer would pay a tax debt that he didn’t owe merely to avoid being criminally prosecuted. Consequently, the threat of criminal prosecution (even if it were true) is a form of extortion, which, when done by a private individual is illegal in all 50 states.

For example, here is Florida’s anti-extortion law:

836.05  Threats; extortion.–Whoever, either verbally or by a written or printed communication, maliciously threatens to accuse another of any crime or offense, or by such communication maliciously threatens an injury to the person, property or reputation of another, or maliciously threatens to expose another to disgrace, or to expose any secret affecting another, or to impute any deformity or lack of chastity to another, with intent thereby to extort money or any pecuniary advantage whatsoever, or with intent to compel the person so threatened, or any other person, to do any act or refrain from doing any act against his or her will, shall be guilty of a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida