How would you feel about going to court and finding out that if you win, the appeal will be heard by your opponent? That’s pretty much how the Iowa internal tax appeals process works. And while a reform bill is getting attention in the legislature, that feature isn’t going to change just yet, reports Maria Koklanaris in a State Tax Analysts article:
In a letter to legislators, DOR Director Courtney Kay-Decker said the department was able to successfully draft legislation for some of the priorities outlined in the report, including implementing a small claims process and eliminating the State Board of Tax Review for all matters except property tax protests. But she said it could not come up with language this year for what she called her highest priority, which is also the top priority of taxpayers in the eyes of many.
“Most importantly, we were unable to cohesively and comprehensively incorporate the recommendation to remove the Director from the appeals process,” Kay-Decker said in her letter. “This is disappointing as it was perhaps my highest priority.”
The Council on State Taxation gives the current Iowa system failing marks. From Tax Analysts:
Ferdinand Hogroian, tax and legislative counsel at the Council On State Taxation, said Iowa’s tax appeals process is the only area in which the state earns poor marks in COST’s most recent report on tax administration. The report specifies the director’s involvement in tax appeals as a major problem.
“Although an Administrative Law Judge of the Department of Inspections and Appeals conducts evidentiary hearings, IA DOR can retain jurisdiction and override,” the report says.
Attorney Bruce Baker, who frequently does battle against the Department of Revenue, points out the obvious problem with the current system: “I’ve often joked that my clients would like to be able to appeal to the chairman of the board.” But the Department of Revenue will retain that option, at least for now.
While the legislation they are working on (SSB 3203) is an improvement, I still think Iowa needs an independent tax court — perhaps three judges from around the state who will agree to serve as tax judges as part of their caseloads to develop expertise. It could be modeled on the specialty business litigation court that Iowa is experimenting with. Now if you leave the current internal Department of Revenue Process — appealable by the Department to the Director of the Department — you litigate before generalists judges who may have never heard a tax case before. They tend to defer to the Department, even when it seems clear the department is wrong.
Paul Neiffer, A Bad Day in Court. A bookie who tried to hide funds overseas does poorly.
TaxGrrrl, Taxes From A To Z (2014): G Is For Garnished Wages . I hope not yours or mine!
Kay Bell, Sorry tax pros, more taxpayers filing on their own. Taxpayers always have that option, and preparer regulation would drive more taxpayers to do so by increasing the cost of preparers. Whether that will improve compliance is left as an exercise for the reader.
Christopher Bergin, It’s Not Just About Lois Lerner (Tax Analysts Blog):
But we need to remind ourselves that there is a lot more potential abuse going on at the IRS than what’s been associated with Lois Lerner. Here are a few examples. I talk to many practitioners who (a) don’t want to be identified, probably for fear of retaliation, and (b) question the independence of the IRS Appeals Office. That is a big problem.
In 2012 a high-ranking IRS executive said in a speech that she believes the government has a higher duty than that of a private litigant. “The government,” the executive said, “represented by the tax administrator, should not pursue a particular outcome and then look for interpretations in the law that support it. The tax administrator should do nothing more or less than find the law and follow it, regardless of outcome. The separation of powers, a bedrock principle of our Constitution, demands it.”
I have a few questions. How many private tax litigators believe that’s actually how the IRS operates? If this noble statement is taken seriously by others in the IRS, why did Tax Analysts have to go to court to get training materials? And why is the IRS being questioned so strongly by Congress on its belief – or, more accurately, the lack thereof – in the bedrock principle of the separation of powers?
The results-driven IRS approach to non-political issues doesn’t lead you to think Lois Lerner was acting with Olympian detachment in the Tea Party scandal.
TaxProf, The IRS Scandal, Day 309
Len Burman, How the Tax System Could Help the Middle Class (TaxVox)
My most “innovative”—some would say “radical”—policy option would replace across-the-board price indexing, which exists under current law, with indexation that reflects changes in economic inequality.
An awful idea. The tax code will never “solve” the problem of inequality. This is a clever-sounding idea that will do nothing but create complexity.
Sauce for the gander, indeed. Identity Thief Sentenced for Filing Tax Returns in the Names of the Attorney General and Others:
A federal judge sentenced Yafait Tadesse to one year and one day in prison for using the identities of over ten individuals, including the Attorney General of the United States, to file false and fraudulent tax returns.
I don’t wish identity theft on anybody, not even a politician. It can lead to all kinds of expensive and time-consuming inconveniences and embarrassments. But if it had to happen to someone, why couldn’t it have been Doug Shulman, who let identity theft spin out of control while he pursued his futile and misguided preparer regulation crusade?