Daniel Maestri was having financial difficulties with his restaurant business, and he let some things slip. Unfortunately, they were the wrong things. Mr. Maestri, whose Italian restaurant in Tontitown, Ark. has been in the family since 1923, got behind on his state sales taxes and federal withholding taxes in late 1985. The State of Arkansas said he could pay the sales taxes in installments. When he tried to work out a similar plan with the Internal Revenue Service, he ran into trouble.
He was given 10 days to pay $54,000 in taxes. When he couldn't, he was forced to declare Chapter 11 bankruptcy. ``I am fully aware that the IRS must collect taxes,'' he told a group of Senators Monday in the third and probably final set of hearings on a proposed ``taxpayers' bill of rights.'' But it can do it, he said, ``without the use of unnecessary, unreasonable, and abusive power...without destroying lives and businesses in the process.''
Is the IRS the fiscal equivalent of the Gestapo, as many taxpayers testifying before the committee suggest? Or is it just doing its job effectively, and in fact is no worse than any other bureaucracy, as other IRS-watchers say?
Abuses by the IRS ``don't really warrant the type of publicity it's getting,'' says Eliot Rosen, editor of Tax Notes. He says the number of abuses by IRS agents has not really increased, and that situations like Maestri's are ``isolated cases....A lot of these people are tax protesters'' who simply don't want to pay taxes, period.
Scrutinizing the IRS has been a popular activity on Capitol Hill for more than a decade, and even Sen. Harry Reid (D) of Nevada conceded at the hearings that ``the bulk of the evidence [about IRS abuses] is not new.''
And in a way, Congress appears to be giving the IRS mixed signals. On the one hand, it threatens to rein it in. On the other, it boosted the IRS budget by $600 million for this fiscal year and told it to hire 2,500 more auditors.
Still there does appear to be new momentum to legislate a solution to perceived problems. According to an IRS employee, many of these stem from a ``statistics workshop'' atmosphere where IRS managers pressure agents to close as many cases as possible to show they're doing their jobs.
In February, Sen. David Pryor (D) of Arkansas introduced a bill limiting the powers of IRS agents. Among other things, the bill would:
Require the IRS to schedule interviews with taxpayers at a convenient time for both, so attorneys or accountants could come.
Explain a taxpayer's rights at the outset - including the right to remain silent and to an attorney - in the same way that police do under the Miranda law.
Require the IRS to wait 30 days, up from the present 10 days, before it could levy a taxpayer's property. It would also exempt property like animals and furniture, from IRS liens.
If the IRS and taxpayer agree to an installment plan for paying taxes and penalties, the bill would compel the IRS to hold to that plan unless the taxpayer misrepresents his financial situation or the situation changes. The IRS would have to offer an installment payment plan when the tax liability is less than $20,000.
While 28 senators support this bill, and 70 congressmen support a similar one in the House - ``a historically high level of support,'' according to Senator Reid - it could take a long time to pass it in toto. A faster approach, one Senator Pryor seems to favor, would attach key provisions to other bills, like the debt limit bill.