Putting A Leash on the IRS

Congress considers a taxpayers' bill of rights

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She owed no back taxes and had broken no law. But that did not stop the Internal Revenue Service from seizing $22,000 in Shirley Lojeski's bank account. Lojeski, who breeds Thoroughbred horses in Pipersville, Pa., was unaware that anything was wrong until her checks suddenly started bouncing. Mystified at first, she eventually realized that the IRS had taken her money as a way to get at her boyfriend, Thomas Treadway. The agency had accused Treadway, who ran a trash-management business, of owing $247,000 in back taxes, and suspected that he was stashing his money in Lojeski's account. Treadway later established that he did not owe the $247,000, but not until four months after the case was settled did Lojeski finally get her money back. In the meantime, she had to shut down her business temporarily and was nearly driven into bankruptcy.

Lojeski's tale is just one of hundreds of horror stories that taxpayers can tell about the heavy-handed tactics of the Government's tax collectors. With the dreaded April 15 filing deadline approaching, Congress is considering bills that would ensure greater protection of taxpayers, including a measure sponsored by Senator David Pryor, an Arkansas Democrat, that has come to be known as the Taxpayers' Bill of Rights. While no one denies that the IRS should be tough on tax cheats, critics charge that the agency is often too quick to seize property, sometimes moves on the basis of flimsy evidence, and frequently does not give its target a chance to set things right. Says David Burton, a tax specialist with the U.S. Chamber of Commerce: "Situations between taxpayers and the IRS now get nasty very quickly, and they are hard to get straightened out."

Nancy Seddinger, who runs a real estate business in North Myrtle Beach, S.C., learned last December that her company owed $22,000 in interest and fines. The company accountant contacted the IRS to question the ruling and try to reach some sort of settlement. But in February, with the matter still / unresolved, the agency grabbed the firm's bank account. Seddinger could not meet her payroll and had to halt operations. Her Congressman, Democratic Representative Robin Tallon, later managed to get the bank accounts released, but Seddinger is still jousting with the IRS to clear up what she calls "my nightmare."

Many enforcement actions are based on colossal blunders. One Texas taxpayer, who prefers to remain anonymous for fear of IRS retaliation, paid more than $22,000 in taxes for 1987 but fell a whopping 2 cents short of the proper amount. The IRS promptly sent him a bill for $400.31 in penalties. Reason: the agency levied the fine on his entire tax liability -- not just the missing 2 cents. The taxpayer is appealing the ruling.

One of the most notorious IRS foul-ups occurred last July, when the agency seized $70.76 in a bank account belonging to nine-year-old Carmin Fisher of Junction City, Ore. The Government was trying to collect part of a delinquent $21,182 bill owed by Carmin's grandfather Charles Fisher. Only after the case got nationwide attention did the IRS back down and return the money, saying it had mistakenly assumed that Carmin's grandmother, who was listed as guardian, owned the account.

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