Clarence Earl Gideon must be turning over in his grave.
Imagine a judicial system where criminal prosecutors had the power to disbar criminal defense lawyers. How long do you think it would take the United States Supreme Court to issue a unanimous decision declaring that system unconstitutional?
Yet the IRS is empowered to punish with the full force of its bureacratic power tax lawyers and other taxpayer counsel whom it believes has violated its standards of conduct.
There, I said it. I hope I don’t get suspended for it.
Paul Caron reports that the IRS has suspended one of America’s top tax lawyers from practice before the IRS for a period of 48 months for filing his tax returns late. The Administrative Law Judge initially suspended Kevin Kilduff for a period of 24 months. Kilduff appealed the suspension and the Treasury Department upped it to 48 months.
Here is part of the Treasury department’s ruling on appeal:
The Respondent was employed as an attorney by the IRS for about five years, beginning in about 1993. Since that time he has been employed by, and a partner in, law firms, initially in Philadelphia and, at the present time, in Boston. His principal defenses herein are that he filed all his tax returns, including the 2002 Federal tax return that the Complainant alleges was not filed, although he admits that “a couple” of his returns may have been filed late. He also defends that all the returns were accurate and that every dollar of taxes that were due were paid. His other defense is that this matter was instituted as a personal vendetta against him by Revenue Officer 1 because of his “zealous” representation of a client in dealing with Revenue Officer 1, the IRS agent in the case….
In this regard, in about 1999, his mother was diagnosed with Illness 1 and he quit his job in Philadelphia and moved to Boston and moved in with his parents to care for his mother, and remained with them for the next five years. During this period, he and his sister cared for their parents, cooking and taking them to doctor appointments: “That’s why my tax returns were late.” He also testified that he is a partner in the fifth largest law firm in Boston and “one of the most highly regarded tax controversy attorneys in this city [Boston].” …
The Appellate Judge’s (AJ) decision to double Kilduff’s suspension seemed to be, at least in part, motivated by the fact that he believed Kilduff was disrespectful of the proceedings:
Throughout the course of this matter, I was struck by the Respondent’s apparent disinterest in, or lack of respect for, this proceeding. …
In addition, the AJ was unmoved by Kilduff’s proffered defenses:
The Respondent’s two defenses herein are that the situation with his parent constituted reasonable cause for his tax delinquencies and should therefore be excused or mitigated, and that because this matter was instituted due to a vendetta by IRS Revenue Officer 1, this proceeding should be dismissed. I find that neither defense has merit.
While I can sympathize with the Respondent and his obligations and sacrifices during this period, the record establishes that during the period encompassing tax years 2000 through 2005 he was employed full time for a major laws firm with yearly adjusted gross income ranging from $102,000 to $138,000. Further, while he had obligations caring for his parents during this period, it is difficult to imagine that he could not find the time to prepare and timely file these returns. Considering his expertise in the field, it should not have consumed an inordinate amount of time. I therefore reject the Respondent’s reasonable cause defense herein….
Look, I don’t have a problem with a rule that requires tax advisors to comply with the tax laws. That makes perfect sense to me. What I object to is that the very people charged with making complaints against taxpayer representatives are the people against whom these representatives are most often pitted.
IRS officials don’t file OPR complaints against IRS representatives in a vacuum. They have to be provoked. Obviously, then, IRS officials are more likely to complain about the actions of representatives who are aggressive in representing their clients interests than they are against their less aggressive adversaries.
Let me illustrate this with a simple hypothetical:
- Taxpayer A and B owe $200,000 to the IRS in delinquent income taxes, penalties and interest.
- In both cases, the Revenue Agent issues third party summons of the taxpayer’s banking records, and repeatedly and without cause by-passes the taxpayer’s representative and contacts the taxpayer directly.
- Taxpayer A hires a tax lawyer who does the following:
- Assertively confronts the Revenue Agent about his improper actions;
- Makes a FOIA request;
- Moves to quash the Revenue Agent’s summons;
- Appeals the Revenue Agent’s actions to his or her group manager;
- Solicits the assistance of the Taxpayer Advocate’s office;
- Files an Application for Penalty Abatement;
- Files a TIGTA complaint against the Revenue Agent for harassment of his client.
- Taxpayer B hires a tax lawyer who does the following:
- Provides a financial statement to the Revenue Agent;
- Politely and deferentially asks the Revenue Agent to consider an installment agreement;
- Does not request penalty abatement;
- Does not confer with the Revenue Agent’s group manager;
- Does not obect to the Revenue Agent’s conduct;
- Does not move to quash the third party summons.
- Both lawyers have the same history of late filing as has Kilduff.
Which taxpayer do you think got better representation? And which lawyer do you think is more likely to be sanctioned by the IRS for a violation of Circular 230?
The answers, of course, are obvious and their significance should be as well.
Lawyers who aggressively represent their clients – as they are duty-bound to do – are more likely to be punished by the IRS than lawyers who do their jobs less diligently.
This inescapable fact has a chilling affect on the actions of all IRS representatives and, I would argue, is precisely what the OPR system is designed to accomplish.
In spite of all of the IRS pronouncements that it values the taxpayers’ right to counsel, the truth is that most IRS officials abhor it. They regularly tell taxpayers that they are wasting their time in hiring a lawyer, that if they have the money to pay for a lawyer they should instead pay that money to the IRS, and that lawyers will rip them off. These are my experiences and they are not only real, they are myriad.
Now, if you’ll excuse me, I have to go make sure that all my tax filings are in order.