"'Thou shalts" ... and better ways.

• Author: Dicker, Eli J.
• Position: IRS's corporate e-filing mandate

Some years ago when I was a new government lawyer, I heard a story told about a revenue officer who boasted to a delinquent taxpayer engaged in the restaurant business. The revenue officer threatened, "If you don't pay your tax bill by lunch, don't bother putting the soup up for dinner, because I'll levy you and shut you down." Being new to the IRS's Office of Chief Counsel, and not having had much experience in the collection area, I didn't give much thought to the story or inquire about its veracity. Rather, I simply filed it away under the heading "IRS lore."

Recently, I had the occasion to recall that story while reading news reports on the latest instance of IRS overreach--the agency's clandestine freezing of thousands of taxpayer refunds. Was this merely a gaffe, an "oops?" Or is there some connection between it and other not-exactly-taxpayer-friendly actions. Specifically, I had in mind Announcement 2005-80, the recent "take-it-or-leave" pronouncement setting forth settlement terms on an array of "tax shelter" transactions identified by the IRS to be abusive. Another example would be the IRS's corporate e-filing mandate, which stands unchanged despite evidence suggesting that the vendors and IRS (and, yes, taxpayers) won't be ready.

These IRS actions--let's call them "Thou Shalts"--suggest that the IRS is feeling the need to flex its muscles and, just perhaps, to demonstrate that it has the raw power to do these things. Stated bluntly, it needs to (or wants to) show the taxpayer community who's boss. No one seriously questions the IRS's authority to collect tax or undertake the steps necessary to deter fraud, abuse, or even inadvertent non-compliance. Those of us who pay our taxes (as individuals or corporations) appreciate the prudent exercise of that authority. We also recognize that there has been a re-balancing of the IRS's emphasis on customer service and enforcement. Thus, while the IRS Restructuring and Reform Act of 1998 presaged a swinging of the pendulum toward customer service, intervening events have pushed the balance the other way. The question isn't whether a shift was appropriate; it's whether the agency--in its efforts to effect a new balance--might have gone to far or paid insufficient attention to longstanding taxpayer rights.

Consider the e-filing mandate. Although corporate e-filing has been a goal for many years, the IRS's January 11, 2005, mandate came out of the virtual blue, without formal consultation or...