Can the IRS truly be reformed?

• Author: Schnepper, Jeff A.

It has been said that the only difference between death and taxes is that death doesn't become more complicated -- and more painful -- every time Congress meets. Well, they're at it again! As this column was being written, Congress was debating several new tax proposals that seek to change your relationship with the Internal Revenue Service and the very structure of the tax system itself.

Congressional testimony of IRS mismanagement and uncontrolled strong-arm activities forced a "sincere apology ... for mistakes we have made and for any anguish we have caused" from Acting Internal Revenue Service Commissioner Michael P. Dolan. It also resulted in legislation proposing the creation of a new IRS Oversight Board within the Treasury Department with review powers over various budget items, personnel decisions, operational functions, and the approval and establishment of the mission and goals of the IRS itself. Composed of 11 members, it would contain eight who could not be Federal employees. These "private life" members would be selected based on their expertise in management, service, law, technology, and organization. It is hoped that they will give a non-bureaucratic perspective to taxpayer service.

While the IRS's proclaimed goals rejected quotas as a criteria in compensation and promotion, the internal culture of the agency mandated the opposite. Although the IRS generally tries to do a good job, as a former IRS employee put it, "the organizational culture tends to be driven by the need to produce good collection figures, which can lead to sloppy and even overbearing collection methods at the field office level." While I don't expect the Board to have any real impact on the IRS, collection abuses should decrease thanks to the publicity they have received.

With the IRS, taxpayers always have the burden of proving their deductions. With respect to alleged unreported income, the IRS has the burden of proof. Except for unreported income, individuals always are guilty until proven innocent. Is this an appropriate reflection of the American spirit? Is it potentially poisonous politically?

The Internal Revenue Service Restructuring and Reform Act of 1997 contains within it a Taxpayer Bill of Rights 3, with one of the provisions turning the traditional taxpayer burden of proof on its head. The proposal provides that the IRS shall have the burden of proof in any court proceeding with respect to an issue of fact (not law) if you assert a "reasonable...