The Internal Revenue Service is only one of the many administrative agencies governing our nation, ruining lives since 1862. In all seriousness, the IRS has been known for having a bad rep — every year, the IRS sends out millions of notices to taxpayers requesting additional payment due to “errors” on tax returns. Granted, there are people who fail to report certain income, who claim tax deductions they were not entitled to, or who make simple math mistakes; nonetheless, what can you do if you obey tax laws and are still wrongfully penalized?
Product of Necessity
A 2016 poll determined 70% of Americans aren’t confident in the federal government’s ability to successfully tackle important issues. Today, the average taxpayer believes the state government wastes 42 cents out of each tax dollar and the federal government wastes 51 cents out of each tax dollar. As much as we may disapprove of the tax system, I feel it necessary to first emphasize the importance of administrative agencies. We need administration agencies such as the IRS as they can provide expert knowledge to create predictability, consistency, and stability in rule making and regulation.
Congress does not have the expertise in tax collection and enforcement of the law, nor would they have the time to handle such a high volume of would-be cases. It becomes apparent that regulation by expert organizations is essential; however, is the unfair treatment towards taxpayers necessary?
Administrative Agency Functions
It is important to note what they IRS can and can not do.
To begin, there are six functions all administrative agencies can perform. Administrative agencies, such as the IRS, have the power to:
- Advise: How can taxpayers follow all laws regarding taxation?
- Supervise: Taxpayers with the highest “score” are watched closely.
- Make rules: The IRS regulates the rules (legislative power).
- Investigate: Taxpayers with highest “score” are investigate (executive power).
- Prosecute: Legal proceedings are instituted (executive power).
- Adjudicate: The judge reviews evidence and argumentation (judicial power).
On the other hand, the IRS can not regulate in ways that are:
- Arbitrary: having more than one way to accomplish something.
- Capricious: acting in ways with the intent of harming.
- Unreasonable: acting in ways that is more than necessary.
The system of checks and balances in governments work to prevent one branch from overpowering the others. In administrative agencies, there are no checks and balances. As a result, administrative agencies do become too powerful, and there is room to act arbitrarily, capriciously, and unreasonably. How do we protect ourselves from over powerful administrative agencies? What is your defense, as a taxpayer, against wrongful accusation or penalization?
There is no defense.
Taxpayers must overcome a series of “hurdles” in order to take the IRS to court. These hurdles are set in place to keep the high volume of cases out of the supreme court. Therefore, the process has been designed in attempt to discourage the public from suing administrative agencies.
If a you do choose to sue the IRS for damages, you must first have standing, proof the IRS harmed you or your business. Next, you must exhaust your remedies; a remedy is a way of finding a solution using the law, and all remedies must be pursued as fully as possible to proceed. Unfortunately, as the title suggests, you will very likely feel exhausted in attempt to jump this hurdle since it will consume you financially. In overcoming this obstacle, you must contact the supervisor of the IRS employee who wrongfully accused you, and he or she will charge you an outrageous hourly rate of $250+ to sit down with you to examine the evidence supporting your stance. If approved, you will then need to meet with the district director and proceed similarly. Finally, if you have convinced the district director of the IRS’s mistake, you can then go to a panel of three administrative agency lawyers. The lawyers will use stare decisis, the application of precedent, to create the brief detailing why your case should prevail. By now, the fees and costs to meet with the supervisor, district director, and administrative agency lawyers have accumulated excessively; often times, the additional cost of fighting the IRS exceeds the initial price the taxpayer owed due to wrongful accusation. In this way, many people stop at this hurdle, and they do not push the case forward.
In addition to a substantial cost in terms of both time and money, your chances of winning against the IRS are slim to none. To put the case to an end, all the IRS must do is show substantial evidence to support their argument. Now, what does substantial mean? Providing substantial evidence is proving 50% of the argument. On the other hand, you the taxpayer must provide manifest weight, entailing proof that 80% of the IRS’s evidence is erroneous. You must provide a very high burden of proof while the IRS must provide a very low burden of proof.
In suing administrative agencies, you will either be forced to forfeit the fight, or you will be knocked out cold.