Tags: Congress | IRS | code | tax

The Tax Scandals Are Real, But Are the Investigations Phony?

Monday, 05 Aug 2013 08:29 AM

By Denis Kleinfeld

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Americans have had a distrust of tax collectors starting with King George III and continuing right up to today.

Clearly, it will be a nearly impossible job for the incoming commissioner of the Internal Revenue Service to restore trust in the tax-collecting agency where not much trust existed in the first place.

Congress established the ground rules by which the IRS operates. Under the oversight of numerous Congressional committees, the IRS carried out the mission assigned to it, which, in turn, has led the country to where it stands today.

Three recent IRS commissioners appeared before Congressional committees and are now in disgrace. One IRS management employee (a quasi-political appointee) has taken the Fifth. The Office of the Chief Counsel is in the crosshairs of the IRS investigations. Numerous other IRS personnel appear to be targets of the investigation, as well.

The president, it is speculated, may be directly involved.

It wasn't supposed to be this way.

When Congress faced outraged taxpayers in 1998, Congress responded by enacting the Taxpayer Bill of Rights as part of the IRS Restructuring and Reform Act. While many Taxpayer Bill of Rights provisions were rather superficial in application or ignored in practice, there was a specific requirement that the IRS is required to terminate an employee if certain violations were proven.

These are known in professional tax circles as the "10 Deadly Sins."

The testimony and evidence from the Congressional investigations of the IRS to date show that at least five of the 10 are likely, if not already, proved against a number of IRS witnesses who have testified.

These are the five:

Number 2 — Providing a sworn false statement under oath in a material matter concerning a taxpayer.

Number 3 — Violating the constitutional rights or discriminating against taxpayers or employees.

Number 4 — Falsifying or destroying documents to cover a mistake made by any employee with respect to a matter involving a taxpayer.

Number 6 — Violating the Internal Revenue Code, Treasury Regulations or the policies of the IRS (including the Internal Revenue Manuel) for the purposes of retaliating or harassing a taxpayer, taxpayer representative or other employee.

Number 7 — Willfully misusing of Internal Revenue Code section 6103 to conceal information from Congressional inquiry.

The latter two have considerable importance in tax.

Internal Revenue Code section 7212 makes it a crime — punishable by up to three years in jail — by whoever corruptly impedes, or endeavors to obstruct or impede, the due administration of the tax law. The term "whoever" is not limited to taxpayers, but also includes IRS personnel. To date, the IRS has always taken an expansive view of conduct that it sees as obstruction or impeding the due administration of the tax law.

Section 6103 deals with disclosure and confidentiality of tax information and applies to officers and employees of the United States. Basically, it is a big no-no and can result in both civil and criminal liability for government violators.

Even more critical, government needs the taxpayer's trust or it will face the same consequence as happened to King George III.

With an election year coming up, will politics overcome principle that is standard operating procedure in Congress, or will principle overcome politics as it did in the case of President Nixon?

While the IRS scandals are real enough, like a cancer on the body politic, it remains to be seen if the investigations by Congress will turn out to be real also.

© 2014 Moneynews. All rights reserved.

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