New IRS Chief May Focus Less on Enforcement

Published July 1, 2008

The U.S. Senate has approved Douglas Shulman as President George W. Bush’s appointee to take the reins at the Internal Revenue Service (IRS). Shulman replaces Mark Everson, who stepped down last year.

The most important element of Shulman’s resume from a tax service perspective is his service on the National Commission for Restructuring the IRS. That commission was formed in 1997 as a result of the mounting pressure on Congress to deal with growing IRS abuses and the fallout of an impossibly complex tax system. Shulman was senior policy advisor for the commission and later its chief of staff.

Fresh Perspective

This experience brings a fresh perspective to the IRS at a time when the agency has been returning to the heavy-handed tactics that caused congressional reprisals in the first place. In his role with the Restructuring Commission, Shulman, who took over as commissioner on March 24, was directly involved in some of the most significant pro-citizen changes to the tax system in 80 years. These include:

  • establishment of the collection due process appeal rights;
  • expansion of innocent spouse relief;
  • imposition of the so-called “10 deadly sins,” the prohibited acts that could lead to the firing of an IRS employee; and
  • removal of the Office of the Taxpayer Advocate from enforcement management chains of command.

When Shulman was asked whether his administration would emphasize taxpayer service or law enforcement, he stated to the Senate Finance Committee during his confirmation hearing, “to be forced to choose between the two is a false choice. In order to execute its mission, the IRS must do both.”

Guidance, Service, Enforcement

Shulman added these details in the March hearing: “For taxpayers who pay their taxes willingly and on time, which is the great majority of Americans, there must be clear guidance, accessible education, and outstanding service. Our aim should be to make it as easy as possible for them to pay the correct amount of taxes in the most efficient and least burdensome manner possible.

“For taxpayers who intentionally evade paying their taxes, there must be rigorous enforcement programs,” Shulman continued. “But whether serving taxpayers or enforcing the law, it is absolutely essential that Americans believe the IRS is fair and that it respects the rights of all taxpayers.”

Those statements draw a stark contrast between Shulman and former IRS Commissioner Margaret Richardson on the subject of the continuing friction between taxpayer service and enforcement of the tax laws. Richardson was the IRS head during the 1990s when the IRS was by all accounts out of control.

Former Punishment Focus

Richardson once stated if given a choice between taxpayer service and enforcement, “enforcement will win out every time.” Put plainly, she (and her administration) preferred to ground people into powder for failing to comply instead of helping them to comply properly.

That attitude, which prevailed during the 1990s, is in my view primarily responsible for the growing problem of IRS abuse.

Shulman is not the first IRS commissioner to come from outside the agency’s culture of enforcement. Charles O. Rossotti, who served for five years beginning in 1997, was hired from outside government to reform the IRS’s computer and information systems and bring the agency into line with “customer service” strategies used by the private sector.

Enforcement actions under Rossotti’s headship fell substantially, primarily because of the need to implement the changes brought by the Restructuring Act. IRS enforcement actions fell by up to 90 percent.

When Rossotti stepped down, Everson was hired to put the teeth back into the IRS. That he did–I have chronicled over the past five years the return, under Everson’s watch, of what I’ve often called the Darth Vader approach to tax collection. In fact, insiders in Washington, DC stated of Everson, “enforcement is his middle name.”

Middle Ground

Does Shulman’s confirmation mean we’ll return to the days of the “kinder and gentler” IRS? I doubt it. It appears Shulman falls into more of the middle ground between Rossotti and Everson.

But what is refreshing about Shulman is his experience with the Restructuring Commission. His service on that commission means he is well aware of the far-reaching damage caused by out-of-control tax collectors.

He also knows errors–both on the part of the IRS and by citizens–drive a great deal of what the IRS’s enforcement theologians call “noncompliance.”

Given that background, perhaps we can hope for more evenhanded treatment in the resolution of outstanding tax problems. Perhaps the “just squeeze them harder” attitude might mitigate to some extent. We’ll see.

Dan Pilla ([email protected]) is a nationally known tax litigation consultant and author of numerous books on IRS abuse prevention and cure and problem-resolution issues, including The IRS Problem Solver. He also publishes the Pilla Talks Taxes newsletter. An earlier version of this article appeared in the April 2008 issue of Pilla Talks Taxes. Used with permission.