Collections, enforcement slow to near halt in N. Texas district

04/01/2000

By Todd Bensman / The Dallas Morning News

Having not filed a federal tax return for 10 years, Oak Cliff resident Johnnie Lee Jones watched his IRS debt grow to $17,000. He struggled to keep jobs as collection letters threatening to garnishee future earnings and seize his home started stacking up three years ago.

Newly employed as a cement truck driver, Mr. Jones decided this year to square things. He girded himself and marched straight into the maw of one of America's most-feared federal agencies.

But he was treated to a most pleasant surprise: A cheery IRS representative in a downtown Dallas walk-in center told him the agency was prepared to virtually wipe the slate clean.

"They're giving me a chance," Mr. Jones said recently, on his third visit to the center. "They could have gotten nasty with me, but they're trying to help me - 100 percent." The timing of Mr. Jones' approach, it turns out, was just right.

Two years after high-profile Senate hearings showcased IRS abuses, Mr. Jones joins about 6.5 million North Texas taxpayers - roughly 3.4 million individual filers - in dealing with an agency in the throes of a difficult transformation from pit bull to gentle giant.

Passage of the IRS Reform and Reconstruction Act of 1998 followed the hearings and has left the agency struggling to reinvent itself and its 33 regional districts. North Texas is one of the nation's largest districts.

Amid the clamor, collection and enforcement activity in North Texas has come to a virtual halt. Other challenges remain: computer systems that are far from being upgraded and the emerging need to keep up employee morale.

Looking ahead

Local officials also concede that it probably will take a couple of years before most taxpayers notice advances in the agency's core business: handling filing problems,collecting money and enforcing tax laws.

"We're trying to rebuild the house and live in it at the same time," said Fanny Smith, an IRS spokeswoman in Dallas.

The restructuring includes the dismantling of the North Texas district, whose nearly 3,000 employees helped bring $54 billion into the U.S. Treasury last year. By Oct. 1, the district is supposed to be rebuilt as four distinct specialty divisions designed to be more modern and user-friendly. The Tax Exempt and Government Entities Operating Division is in place, but whether the other three divisions will meet the deadline is unclear.

The machinations of getting there, meanwhile, have helped almost halt audits, collections and enforcement activity in North Texas, agency figures indicate.

Property seizures in North Texas plunged from 286 in 1996 to three last year and one so far this year. Meanwhile, the number of people who owe uncollected taxes increased from 51,600 in 1997 to 71,100 last year. The number of businesses in debt to the IRS jumped from 9,900 to 16,100 in the same span.

Some in Congress are demanding stepped-up enforcement, and IRS Commissioner Charles O. Rossotti asked for a budget increase of $769 million to hire nearly 2,000 more employees.

But local IRS executives, still sensitive to potential public criticism, say they probably will continue to lean toward public education and second chances for the errant, on the theory that those steps will reduce the need for tougher actions.

'Reluctance'

"I'm not going to kid you, there is reluctance out there to take action," said Mary Durgan, chief of the collection division for the Dallas IRS, which fields 200 revenue officers. "It's been very difficult because I think some of our people are wondering what they are supposed to be doing."

In Dallas, for instance, many trained auditors have staffed help booths at walk-in centers. Instead of chasing tax scofflaws, they answer telephones or assist people with their 1040EZ forms.

Jim Littlejohn, president of the Dallas branch of the National Treasury Employees Union, said the upheaval has challenged morale. Part of the cause, he said, is a disciplinary code in the 1998 law known euphemistically as "the 10 deadly sins."

The code requires automatic termination of any auditor judged to have willfully violated procedures. Taxpayers here and across the country have flooded the IRS with complaints about auditors since the code became effective.

"People don't understand how any of it is going to work, and this thing is supposed to go operational Oct. 1," Mr. Littlejohn said.

The struggle to strike a balance between too much enforcement and too little hasn't been easy.

"Life has changed. They're just not as threatening, and they have gotten a lot more polite," said Jay Schlichting, who runs a business assisting Dallas taxpayers in trouble with the IRS.

"But the laws have not changed. This is what we in the business consider a pendulum swing all the way in one direction. We all sense it is going to swing back. It has to."

Permanent change

IRS officials say they hope the changes will be permanent.

One involves creating so-called taxpayer advocate offices in each state. A previous incarnation of the office helped taxpayers resolve disputes with the agency but tended to defer to IRS executives. The 1998 law grants the advocate authority to order solutions that benefit taxpayers, even those with runaway tax bills or who have failed to show up for audits.

Laurel Cummings, taxpayer advocate for North Texas since she assumed the post March 13, said training has started for 77 staff members in her office.

"The main difference is we are teaching people who had been very proficient at protecting IRS interests that their primary responsibility from now on will be to the taxpayer," she said.

Another approach is the soft-sell for collecting overdue taxes. Liens and property seizures will be a last resort for hard-core tax cheats.

The presumption is that most people and organizations who don't pay their debt to Uncle Sam are simply confused by complex tax codes.

Rosie Slaughter is the national director of examinations for the IRS division that will oversee tax-exempt organizations such as churches, employee retirement plans and government entities. In charge of auditing those entities from her Dallas office, Ms. Slaughter said she will devote the resources to help the people who run nonprofits avoid mistakes.

Customer service

The days of actively hunting down groups and threatening to revoke their tax-exempt status are largely over, she said. Her division is the only new local IRS unit in place, and her staff should be hired and trained this year.

"We are recognizing that we cannot dictate to an organization, but we can explain what the IRS expects and what consequences they face," she said.

Other changes visible to North Texas taxpayers might seem cosmetic but have been greeted with enthusiasm. Some of the region's 10 walk-in help centers, including five new ones, have been renovated and beefed up with staff. And more of those staffers are multilingual.

At the downtown Dallas center in the Earle Cabell Federal Building, 2,693 people received help in a recent week. The number was nearly 1,000 more than in the same week a year ago. Few had to wait longer than 15 minutes to see an IRS representative, said Kim Stewart, interim branch chief who oversees all 10 centers.

She sounded more like a Wal-Mart manager than a front-line tax collector, as her sentiments reflected what officials hope is the emerging face of the IRS:

"We need to be more geared to providing customers with service," she said.