Personal Health : Treating Tax Abuse : A Therapist Helps Recovering Alcoholics, Addicts With a Special Problem--the IRS

During the last four years of his daily use of alcohol and cocaine, John G. didn’t do a lot of things.

He didn’t pay attention to his wife, who eventually divorced him.

He didn’t pay for insurance, which cost him his BMW.

He didn’t pay his bills, which led to the loss of his beachfront condominium.

But when he entered a substance abuse recovery program in 1986, something else he hadn’t paid haunted him even more. It was the debt he owed to the Internal Revenue Service.

“I stopped paying taxes in 1982 when my marriage broke up, and then I went exempt in 1983 so I could put money aside and pay it back,” said John, a motion picture lighting technician who asked that his last name not be used. “That didn’t happen though, because my drug and alcohol use got in the way. By the time I went into the recovery house, I owed $60,000 in back taxes, penalties and interest. There didn’t seem to be any way out.”

As it turned out, there was.

Through a friend, John met Joyce Rebhun, a Los Angeles tax therapist whose job, as she sees it, is to sensitize the IRS to emotional crises people go through that keep them from filing tax returns. Since going into private practice four years ago, Rebhun has successfully gotten tax penalty abatements for cancer patients, rape victims, couples who have experienced the death of a child and, most recently, recovering alcoholics and drug addicts.

Several clients afflicted with alcoholism failed to pay taxes for more than 30 years.

“This doesn’t excuse, but it explains,” said Rebhun, a 23-year tax attorney who worked with the IRS. “Any sickness--and alcoholism is a sickness--has to be reasonable cause (for not filing). Why should alcoholism be different than cystic fibrosis?”

That question, she says, is not just a rhetorical one. After clients sign affidavits chronicling their history of substance abuse, Rebhun says she has presented them to examiners at the IRS with positive results. In many cases, she said, the IRS has been both “caring and understanding.”

The IRS? Caring? Understanding?

“They do care,” Rebhun said emphatically. “The people who work there are human beings like anyone else. But they must be made to care. They must be made to understand.”

So where do alcoholism and drug abuse fit into the IRS’ current level of understanding?

Barbara Meckle, acting public affairs director with the IRS’s Fresno office, said that alcoholism isn’t cited frequently when people apply for penalty abatements based on reasonable cause. Nevertheless, she said, “the IRS would view alcoholism as a medical condition. We would need documentation from that person’s physician, a description of the effect the alcoholism had, and then we would look at the person’s tax payment history.”

To the suggestions that some nonalcoholics might seize the opportunity to get off the financial hook with the IRS by inventing a nonexistent substance abuse problem, Rebhun only shook her head: “I don’t think anyone says they are an alcoholic unless they are terribly afflicted with the disease.”

Rebhun’s willingness to work with recovering substance abusers, who inevitably have incomplete or nonexistent tax records, isn’t shared by all tax accountants.

“A lot of firms don’t want to attack these problems,” said Harold Levy, an entertainment industry attorney in Los Angeles.”Rebhun has the reputation of being able to work with these people and recently has gotten some landmark decisions relative to penalty abatement and alcoholism.”

“Not only has she saved people from the loss of everything they have,” said Andrew Landay, a Santa Monica estate planning attorney who has referred several clients to Rebhun. “But she also has prevented a lot of people going to jail.”

As Rebhun’s reputation in the recovering community has increased, so have the number of calls that she receives each day asking for help. On a recent afternoon, Rebhun’s answering machine clicked on nearly 30 times within an hour.

Now that the extension deadline for filing tax returns has passed (the last day for filing a second extension for federal income tax was Aug. 15), Rebhun said that many of those calls become more desperate.

“That’s when I’ll get three suicide calls a day,” she said.

Although a small number of her clients are women, Rebhun said that 99% of the 15 to 20 people she sees each week are men. Men also tend not to file for much longer periods of time than women, she said.

But women often inherit their husband’s tax problems. Rebhun recalled one woman who had been married for 20 years. For the first 15 years, the woman’s husband simply placed their joint tax return in front of her and asked for her signature. For the last five years, however, the man’s alcoholism grew increasingly worse, and unbeknown to her, he stopped filing taxes. By the time the woman came to Rebhun’s office, her marriage was over and the IRS had placed a levy on her wages at work.

“The IRS said she should have known,” Rebhun said. “They never even went after him, because he had an erratic employment record. She was beside herself. But I was able to help her, to make them see what had happened.”

A Common Problem

Professionals who work in the field of alcohol and drug abuse agreed that non-filing of taxes is a common problem for people who enter recovery programs.

“When alcoholics and addicts get into recovery, it’s common for them to say, ‘I thought stopping would be the hardest thing.’ But really, the hardest part becomes the piecing back together of their lives,” said Michael Samko, a Del Mar, Calif., psychologist who works with people in recovery. “Very often they don’t have the coping mechanisms to know how to do that.”

Samko said that many of his patients have tried to run from the IRS for years, changing addresses frequently or taking jobs where they don’t have to report their incomes: “They are much more likely to have a relapse.”

Tom Kenny, substance abuse program director for the Motion Picture and Television Fund in Los Angeles, estimated that at least 25% of recovering alcoholics owe money to the IRS.

“A lot of them have gone exempt, and that’s where the problem is. It’s a perfect trap for a person who has an alcohol or substance abuse problem,” said Kenny, who also is co-founder of Cocaine Anonymous. “They’re spending that money on alcohol and drugs, and when it comes time to pay up, they can’t. And then they get a 25% penalty and interest tacked on top of that.”

One man in recovery owed the IRS $5,000 in back taxes, Kenny said. But by the time he was able to return to work and face the financial wreckage of his past, Kenny said the man owed the IRS nearly $20,000. “It’s worse than with the credit card people,” he said. “At least you can go bankrupt with them.”

Although he said there was no way of knowing how many recovering people have relapses because of the emotional stress, Kenny said, “The anxiety level for people and the IRS is really high.”

Understands the Stress

Rebhun worked as a corporate tax attorney and later with the IRS for five years, but it has only been in recent years that she became sensitized to what she calls the human issues behind tax returns. After going into private practice in 1985, marrying an aeronautical engineer and having a baby the same year, Rebhun said she also gained a personal understanding of an alcoholic’s downward spiral.

“I was working 20 hours a day, and began turning to alcohol as a tranquilizer,” she recalled. “You start out with just one drink, and pretty soon it is four or five. You wake up with a headache and hangover the next day and discover you’re drinking again.”

Soon, Rebhun sought help from a psychiatrist and overcame her problem. Not long afterward, she began working with recovering alcoholics and addicts whose lives have become completely unraveled.

As for John G., who now is preparing to make his appeal to the IRS three years after entering a recovery program, some of his anxiety has been alleviated.

“Rebhun has made me feel that there is some hope of working out a solution,” he said. “What I keep remembering now is the decision I made when I was at the end of my rope, when all my credit cards were maxed out, and I got that letter from the IRS.

“I wasn’t ready to commit suicide,” he said. “I chose to get sober instead.”