Shutdown leaves some U.S. taxpayers defenseless against IRS

WASHINGTON Thu Oct 3, 2013 3:28am IST

WASHINGTON Oct 2 (Reuters) - The shutdown of the federal government has left some tax delinquents defenseless against U.S. Internal Revenue Service (IRS) asset seizures, tax professionals said on Wednesday.

Some IRS tax collectors who pursue individuals and businesses that are delinquent are working through the shutdown, but IRS staff who help these taxpayers defend themselves from collectors have been furloughed, lawyers said.

"The IRS can levy, but we can't get the help to stop the levy," said Diana Leyden, a tax lawyer and director of the low-income taxpayer clinic at the University of Connecticut. "This is a real problem."

Leyden said her group assists as many as 140 people a year in fighting IRS disputes.

Asked about the situation, a U.S. Treasury Department spokeswoman referred questions to the IRS's shutdown-contingency plan, which says the agency is continuing activities "necessary for the protection of government property," including "seizure cases." She declined to comment further.

An IRS spokeswoman said the agency's "shutdown plan is consistent with (its) legal requirements."

Under tax law, the IRS can seize property from Americans who have not paid their taxes. Known as levies, such seizures can target bank account balances, real estate or other assets.

With the shutdown two days old and continuing, other parts of the IRS are closed, including its customer-service phone lines and its staff of full-time taxpayer advocates. IRS walk-in taxpayer assistance centers are also closed.

The U.S. Tax Court, which handles about 90 percent of challenges by taxpayers to the IRS, is also closed.

Despite this, tax levies are still being mailed automatically and enforced by IRS agents who were not furloughed.

IRS levies can often be halted before a seizure occurs, but only when help is available, lawyers said.

In Little Rock, Arkansas, Alicia Mitchell said she has two clients who are losing about $150 a month from their Social Security checks because of IRS levies.

"That's the really frustrating part about the shutdown," said Mitchell, director of the low-income taxpayer clinic at the University of Arkansas that serves up to 150 clients a year.

"There's no access for people who are really suffering from levies," she said.

Levies are different from tax liens. A lien is a claim used as security for a tax debt, while a levy actually takes the assets or property to satisfy the tax debt.

The IRS has furloughed all Taxpayer Advocate Service staffers, according to the IRS' Sept. 30 shutdown plan. Created in 1996, this service offers free help to taxpayers facing problems with the IRS in all 50 states.

The Taxpayer Advocate Service did not exist in its current form during the last government shutdown in 1995-1996.

For the six-month period ending in March, the Taxpayer Advocate handled 4,261 levy cases, down from 5,600 cases in the year-before period, according to a June report.

Without Taxpayer Advocate Service help, "there's no avenue for relief. You're unduly harming a taxpayer," said Laurie Conner, who represents taxpayers before the IRS in Atlanta.