Refund? What refund? Why the IRS is screwing up.

• Author: Barrett, Paul M.
• Position: Internal Revenue Service

Even though he's been running the outfit since 1981, Ronald Reagan still gets away with denouncing Big Government. Prominent in the Reagan pantheon of bureaucratic villains is the Internal Revenue Service. The president has fumed over the IRS's "demeaning practices" and accused it of treating people's earnings as its "personal property." Campaigning for tax reform this spring, Reagan sounded as if he were endorsing popular defiance of the IRS's mission. The tax code, he said, "corrupts otherwise honest people by encouraging them to cheat.... After all, ...what's immoral about cheating a system that is itself a cheat? This isn't a sin, it's a duty."

Sadly, the IRS actually live up to Reagan's damning portrayal this year. Once considered one of the most efficient bureaurcracies in town, the agency has turned into an incompetent bully. Without justification, liens were placed on property and bank accounts were frozen. Returns were lost, purposely misplaced, even destroyed. Refunds were months late, and when they didn't arrive at all, the IRS told taxpayers to start from scratch and refile. If this kind of bureaucratic behavior were directed toward criminal tax evaders, it might be understandable. But its victims are ordinary, honest people who deserve to be treated decently by their government.

Administration officials have attempted to write off the nightmarish filing season as a fluke--the result of a balky new computer. But far more important than any mechanical breakdown is the shift of attitudes and priorities that has taken place inside the Reagan IRS. While the agency's workload has grown tremendously, the administration has cut by more than 20 percent the staff that processes returns, answers taxpayers's questions, and gets refunds out on time. To compensate, IRS supervisors have enforced unrealistic work quotas that, in turn, have led to errors, low employee morale, and the improper destruction of documents. The result: worse service for loyal customers and widespread ill will toward government in general. Then again, to a president whose main enemy is Washington, and who seems to resent paying any taxes at all, that may not sound like such a bad combination.

Don't call us, we'll call you

The first signals that 1985 would be the IRS's worst year ever came from Philadelphia, home to one of the agency's ten regional service centers. In January, businesses in several mid-Atlantic states served by the Philadelphia office began complaining about mysterious delinquency notices dispatched by the IRS computer. Threats to attach property followed, and at least five businesses had their assets impounded. By February it become clear that 27,000 corporate taxpayers had been mistakenly threatened because the IRS had lost track of $300 million in payments for taxes withheld from employees' paychecks in 1984.

In the following months, thousands of people victimized by the Philadelphia center, which serves taxpayers in Washington, D.C., Maryland, Delaware, and Pennsylvania, came forward with their own tales of woe. One diligent Philadelphia taxpayer, who filed in January, spent the better part of February, March, and April calling the IRS to find out why she hadn't gotten a refund. By April 17, the woman had called 203 times; the line was busy 189 times. On 11 occasions when she did get through, she was told the computer was down; no information available. Twice, IRS employees couldn't resolve the problem with the computer up and running. Finally, she got an answer: the IRS had no record of her return, so she would have to refile.

Explaining the agency's reasoning in this kind of situation, one IRS spokesman says, "There are some cases where the data[is] erased accidentally. We still have the actual paper documents, but they would be too time-consuming to find, so we ask for the duplicates." These people seem to forget that they work for the public, not the other way around. Apparently, the IRS now expects taxpayers to correct the government's mistakes and foot the bill as well.

The bad news out of Philadelphia transcended mere carelesness with individual returns. According to press accounts and information provided by IRS employees to congressional offices, no fewer than 27,000 tax returns were improperly shredded at the Philadelphia center. An undertermined number simply disappeared, and an estimated 100 returns were found hidden in a women's restroom. A General Accounting Office inquiry revealed that 150,000 taxpayers had received incorrect delinquency notices from PHiladelphia alone.

The mayhem was not by any means limited to the City of Brotherly Love. At the IRS service center in Fresno, California, officials admitted in mid-May that workers had shredded 60,000 letters from people trying to resolve tax problems. Another 20,000 such letters were destroyed at the Austin, Texas center, while...