This is a story about my experience with the IRS that I hope is not typical but I fear it might be. I’m here to suggest the need for the equivalent of the IRS Taxpayer’s Advocate for small business owners.
My journey begins two years ago when the economy had taken the biggest nosedive since the Great Depression. During these dark days, I managed to keep the doors open to my Los Angeles based public relations agency with 10 employees, all the while maintaining their health insurance and not adding to the skyrocketing unemployment rolls and the burdens of the medically uninsured. However, my husband’s firm faced even greater challenges, and so I chose to reallocate income intended for my payroll tax liabilities to keep his business afloat and his employees working.
Make no mistake: I recognized I had an obligation to the IRS, which I had every intention of paying in full – with interest – which I knew I had ability to pay down the line. Indeed, up until this time my experience with the IRS had been nothing short of positive. The agents were cooperative, compassionate and understanding. I became a proponent of the agency and their humanity until I had the misfortune to wind up at the mercy of an agent, whom I’ll call Agent X, assigned to my case.
Agent X first arrived in my office last October, unannounced without any prior communication, demanding to see me. I wasn’t there so it was all for naught. However, she did manage to leave behind her IRS employee i.d. badge, which were promptly returned after she hurriedly revisited our office later that same day in desperate search of the coveted credentials. As it turns out, this would be an indication of things yet to come.
In short, I would soon discover Agent X would never miss an opportunity to be imperious, brusque or unnecessarily demanding. When my bookkeeper said her lack of understanding could put people out of work, her response was “I don’t care.” Even after my payment scheduling had been agreed and adhered to, Agent X made sure I received a continuum of threatening letters from the IRS; one in particular timed to arrive the day before Mother’s Day. Payments made were incorrectly applied and caused more penalties, which she refused to dismiss. The grievances go on but you get the picture.
The only respite accorded was when Agent X demanded that my CPA and I show up at the regional office for a meeting and then failed to appear herself. It was on this occasion that we had the good fortune of meeting Agent X’s superior, who was everything one would expect and hope from a public servant. Aside from being embarrassed that her co-worker was nowhere to be found, she graciously understood our plight and it was a positive experience for all involved. Official policy aside, I felt at last I was speaking to someone who actually appreciated that I hadn’t just thrown in the towel and let two small businesses go under and thusly add to the list of the unemployed and non-insured.
It should be noted that President Obama is presently talking about reducing the payroll taxes….perhaps, for the reasons I experienced.
The moral of this story could be that when confronted with bullying behavior from an IRS agent take notes, keep a timeline and record everything. However, in all honesty, I can’t be sure what would have happened if Agent X’s superior hadn’t entered the picture. In any case, a small business owner should not have to rely upon the chance encounter, or divine intervention, of an empathetic officer in dealing with the IRS.
In 1979 Congress created the Office of the Taxpayer Advocate in the IRS to deal precisely with heavy handed collection tactics by IRS agents toward taxpayers. The Advocate’s role is twofold: to intercede for taxpayers when normal IRS channels aren’t working, and to identify harmful tax policies and practices that should be changed. By all accounts, the Advocate’s office is doing a great job but its focus is strictly on the individual taxpayer.
Main Street needs its own IRS ombudsman. There are issues that small businessmen deal with, like my own having to do with payroll taxes, that the existing Taxpayer Advocate’s office doesn’t’ handle. And as was the case when the original office was created, small business owners need the equivalent of the Taxpayer’s Bill of Rights, which would set forth our inalienable rights to expect the IRS to deal with us with professional and courteous service (and monitor the conduct of rogue agents).
It’s oft said but in my opinion, you can’t say it enough: The IRS works for us. Now let’s make sure it really works for us especially in this damaged economy.
Epilogue: My own personal case has taken an additional twist. A couple days after my commentary was published in Los Angeles Business Journal, I received a threatening letter from the IRS, demanding payment for fees already paid three weeks prior. I suspect it was more of the same from Agent X. Earlier this week, a Congressman on my behalf called for an investigation into how I was “treated poorly by a particular IRS agent.”