On September 3, 1987, I retired from the IRS after 26 years, the last seven spent as Director of the Manhattan District, and accepted a position as a consultant with a Big 8 firm dealing with its problems vis a vis the IRS. In this article I offer reflections arising out of my unique experience on the inside and outside. I cover areas according to functions in which most practitioners are involved daily.

Examination

The examination function exists both in the Service Center and in all district offices. Not surprisingly, the first problem encountered is a difficulty in communication with the examination function in Service Centers. Much of the communication is via written correspondence as opposed to the telephone or in person. Letter writing leads to time delays and misplaced or lost communications. In many instances, statutory notices are issued inappropriately. I always recommend that if the case is difficult to resolve through correspondence with a Service Center, one should request that it be transferred to the local district office so that the taxpayer's representative can go in person and resolve the particular problem more effectively.

Examinations in the district are performed by a more sophisticated and effective organization. Revenue agents, for the most part, are accounting graduates, many are CPAs and a few are both CPAs and attorneys. The difficulty that I have encounted with the district operations is primarily with agents who propose adjustments and are inflexible in their stance. All too often the agent's response when we try to ensure that our client's facts are being considered fully is "Well, then why don't you go ahead and take your case to Appeals?" In my opinion many agents do not realize the impact of that statement. The additional cost to the taxpayer for the preparation of the protest, and the time needed to appear before Appeals is not taken into account. Another frustration for many clients are agents who, for legitimate reasons, are pulled away from their audits for priority programs. They may have to act as instructors for recently hired agents or help to close out the many tax shelter cases which have stockpiled over the last few years. When an agent leaves a case and is gone for six months or longer, the process becomes costly for the taxpayer. I think that the IRS does not fully appreciate the impact on the taxpayer. In a few circumstances one finds that the taxpayer or the practitioner has not even been notified that the agent has been detailed away and will be gone for a substantial time.

The Coordinating Examination Program involves a team of agents with various specialty backgrounds whose purpose is to examine giant corporations. While in most cases the agent's time is supervised effectively, there are cases where some agents decide that there is an issue and pursue it beyond the necessary point. Taxpayers have provided records and other evidence to substantiate issues that should have been accepted early in the audit. My experience in dealing with the IRS all too often indicates that when one tells an agent that one would like to talk with his or her manager about a case, he or she becomes defensive. However, it is my firm opinion that this is the only way one can get some cases resolved effectively.

There has recently been substantial hiring of agents. Thus, many recent trainees are now auditing the more complex individual and smaller corporate returns. It is important that one gets some idea of the agent's experience level to more effectively assist a client taxpayer with the audit process.

Collection

This function probably causes the most concern for my associates and their clients. I find that many practitioners do not understand the role of the Collection Division and, more importantly, do not appreciate the tremendous authority that a revenue officer has in taking action. Such action can be processing a levy, the filing of a lien, or the seizure and sale of the taxpayer's assets. I have experienced revenue officers who handled very difficult cases in a very professional manner. They carry out their responsibility in protecting the government's interest while considering all the relevant facts and circumstances of the particular taxpayer. However, unlike an agent who is proposing an adjustment where there is still much that can be done before an actual request for payment, the revenue officer is at the point of demanding payment for delinquent taxes. The most difficult part of communicating with a revenue officer is to try to get him or her to appreciate that entering into a payment agreement may be the best action in the long run, both in terms of collecting the most dollars for the government and allowing the taxpayer to stay in business. Here it is very important to seek out a revenue officer's manager if one finds that proposals are falling on deaf ears with no alternatives proposed by the revenue officer other than "pay in full." TAMRA 88 includes a taxpayer bill of rights and a number of provisions which relate directly to the role of the revenue officer. One example is the levy. This previously took effect in seven days. TAMRA now provides 30 days for the taxpayer to react before the amount being levied is, in fact, turned over to the government. This provision gives the taxpayer an opportunity to provide additional facts to get the revenue officer to withdraw his levy. The Act also provides that, as a matter of statutory right, a payment agreement is now an option as opposed to the previous process which provided revenue officers with the flexibility of entering into an installment agreement, but with no statutory provision in the code.

Communication With the IRS

* Service Centers. A most frustrating problem that we face is corresponding with the Service Center. Once a notice is issued, it is almost impossible to respond in time to stop the second notice and in many instances correspondence goes unanswered. I have always recommended that in communicating with the Service Center, for the client's protection, mail any materials Certified/Return Receipt Requested because that is the only evidence one would have to show the IRS that one reacted in time.

The Problem Resolution Office in the Service Center is, in my opinion, burdened with cases that should have been closed in the other sections of the Center but did not get acted on timely or, in fact, there never was a reaction to correspondence submitted by the client.

* Districts. Communications with the personnel in district operations generally is fairly effective since one has a name of an individual and a telephone number. My particular problem with communication in the district rests for the most part with the Taxpayer Service Division. Almost all notices from Service Centers have a toll-free telephone number which puts the taxpayer in contact with District Taxpayer Service representatives. The problem is that these representatives do not have sufficient training and knowledge to be able to deal with many questions raised by notices sent from the Service Center. Thus, it becomes frustrating to call the toll-free number and be unable to get someone that understands why that notice was generated. Thus, in many instances the Problem Resolution Officer at the Service Center or the district is burdened with a case since it appears to be the only way to get an effective resolution to the problem.

Conclusion

My overall opinion of the IRS was and continues to be that it is a professionally managed and effective government organization. It is at the heartbeat of the nation in that everyone deals with the IRS at least once a year when they file their returns (well, most of us do!) and in many instances, the processing of that return is made difficult for the IRS by continual changing of the tax laws.

My critical comments of the Service as an outsider are that I believe all too often some parts of the organization fall into the trap of treating taxpayers not as customers but as numbers and do not appreciate the trauma that a letter from the IRS causes to many taxpayers. Furthermore, I think the IRS has to continue to seek ways of improving the communication process, especially with Service Centers.

My recommendation to my fellow tax practitioners is to treat the IRS personnel as you would like to be treated. However, where you think the process has gone off track, certainly avail yourself of that person's manager and, if that's not satisfactory, remember every manager has a boss. The IRS is truly looking for constructive feedback.

Finally, I think it is incumbent on all to write to the District Director or the Chief of a Division when one wants to make sure they are aware of a problem that could not be resolved otherwise and has been met only by a bureaucratic stone wall. It is equally important to write to that same District Director or Division Chief to pass on a compliment where it is deserved. As a District Director, I always appreciated letters from a critical point of view and, obviously, was delighted to get a complimentary letter on the performance of an employee.

Pete J. Medina is a Tax Consultant on Practice and Procedure with Arthur Young & Company. Mr. Medina is a former District Director of the IRS, Manhattan District. He is a CPA in California and New York, and is a member of those state CPA societies, and the AICPA. Mr. Medina gives a perspective of how the IRS functions as seen by someone who spent many years with the organization; and he contrasts his past and present views. At the end of the article are two organizational charts for the IRS and for the IRS Chief Counsel.