IRS Ruined Him, Man Tells Senate Panel

A Pennsylvania businessman told senators Friday how he and his girlfriend were harassed into bankruptcy by the Internal Revenue Service, an agency that a former IRS official said is intent on driving taxpayers to the wall.

“Their value systems are screwed up,” Joseph B. Smith Jr. of Las Vegas, an accountant who spent 18 1/2 years with the IRS, said of his former employer. But he assured a Senate Finance subcommittee that “the IRS is really a top professional organization.”

Girlfriend Also Penalized

The subcommittee, which is considering legislation to protect taxpayers from IRS excesses, heard Thomas L. Treadway of Pipersville, Pa., tell how he lost his trash-management business and all he owned and how the IRS seized $22,000 from his girlfriend’s bank account to cover his alleged back taxes.

“You are looking at a man the IRS totally destroyed,” Treadway said. “The government has stripped me of everything and . . . nothing they did had any basis in fact . . . . I used to pray at night that this would happen to every American, because only then would the system change.”

Sen. David Pryor (D-Ark.), chairman of the subcommittee and a chief sponsor of the “taxpayers’ bill of rights,” praised Treadway as deserving “a chapter in ‘Profiles in Courage.’ ” He said the IRS would be asked to tell its side on April 21.

Pryor, acknowledging the tough job facing the 100,000-employee tax-collecting agency, said his investigations have led him to the conclusion that the IRS suffers from a bully mentality.

The legislation would require the IRS to prove in civil cases that its tax assessment is correct. The agency would have to inform taxpayers of their rights in much the same way that police must tell people arrested on criminal charges that they are allowed to remain silent.

Ombudsman Proposed

The measure would bar the IRS from evaluating its employees on the basis of how much money they collect; prevent collection of interest and penalties that are assessed because of an error caused by written advice from the agency; triple, to 30 days, the notice required before the IRS may seize property, and create an IRS ombudsman who would look out for taxpayers’ rights and be accountable to the President and Congress.

Treadway said his “nightmare” started five years ago when IRS agents began an audit. The IRS proposed a $247,000 assessment, including interest and penalties, against him.

“I refused to accept . . . and, the next thing I knew, they had already assessed the tax and started seizure actions.”

Assessment Revoked

Ultimately, an IRS appeals officer revoked the $247,000 assessment against Treadway, but IRS agents are threatening “to do the whole thing all over again,” he said.

Smith said agency officials are wrong when they deny that revenue officers are judged according to how much money they collect and how much property they seize.

He read what he said was a memorandum from an agency manager exhorting her employees to “put as little space between (the taxpayer’s) back and the wall as possible.”