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Irs Head Vows Agency Will Amend Its Ways Secret Witnesses Itemize Abuses; Acting Commissioner Issues Apology

The acting commissioner of the Internal Revenue Service issued an extraordinary public apology Thursday to four individual taxpayers - and, by extension, to all American taxpayers - for severe mistreatment at the hands of agency officials.

The tax official, Michael Dolan, also promised immediate changes to eliminate incentives for misconduct and make the IRS more responsive to public complaints.

At the conclusion of three days of hearings on IRS abuses before the Senate Finance Committee, Dolan said he is deeply troubled by the charges leveled against the tax agency this week by taxpayers, current and former IRS officials and outside watchdogs.

Thursday’s session featured testimony from five IRS agents and one former agent, their identities concealed by fabric-covered screens and their voices electronically altered. Their testimony included the following allegations:

Agency workers browse through tax returns to snoop into the finances of celebrities, relatives and prospective dates.

IRS agents are judged by their total tax collections, no matter how poorly documented.

Managers cover up abusive behavior by collection agents.

Revenue officers consider all tax debtors “crooks or flakes” who deserve no sympathy.

Earlier in the week, in emotional testimony from four taxpayers, the panel heard from a retired priest who wrongly was assessed $18,000 in taxes from his mother’s estate and from a California woman who went through a 17-year nightmare with the agency that arose from a mix-up over her husband’s identify.

The hearings were the first formal oversight of the tax agency ever conducted by the Finance Committee, which has nominal supervisory authority over the IRS.

Dolan said that the agency had programs to prevent harassment of taxpayers and abusive collection efforts, but acknowledged that in the cases presented to the Senate, and perhaps in many others, internal controls had broken down.

“While each case was different, the end result is indisputable: We were wrong in the way that we handled many aspects of their cases,” Dolan said beneath bright television lights in the cavernous Finance Committee hearing room.

“The individual cases identified were badly handled, causing taxpayers to suffer in ways they should not have,” Dolan said. “This is wrong. There is no excuse for it, and it is unacceptable.”

He then spelled out actions he was taking to address the panel’s findings.

The agency’s 33 district offices will no longer be ranked on the basis of the amount of tax collected. Penalties will no longer be counted as tax collections to remove any incentive that may exist to pile up overdue tax penalties to raise collection totals.

Each district office will conduct monthly meetings at which taxpayers can vent their complaints against officers. All top IRS officials will be summoned to Washington within the next 45 days to review the committee’s findings and answer the taxpayers’ complaints that were raised at the Senate hearing.

The unaccustomed tone of contrition from the nation’s chief tax collector capped an unusual week of hearings that wounded an agency with few friends in Congress or among the citizenry.

The panel’s chairman, Sen. William Roth of Delaware, said that his intent was not to bash the IRS but to expose the inner workings of one of the government’s most secretive bureaucracies. He denied that the hearings were intended to advance a partisan anti-tax agenda.

Other lawmakers, however, have used the hearings’ revelations to call for a sweeping overhaul of the agency and the tax code.

Indeed, despite the changes outlined by Dolan, senators continued to call for new legislation.

“I’m totally convinced that we need to pass legislation aimed at changing the structure of the system,” Sen. Phil Gramm, R-Texas, told Dolan at Thursday’s session. “We may or not fix the unfairness, but at least we’ll show we care.”

Opening the hearings earlier this week, Roth said that the IRS has sweeping police powers and little accountability.

“The IRS can seize property, paychecks and even the residences of the people it serves,” he said. “Businesses can be padlocked, sometimes causing hundreds of employees, who are also taxpayers, to be put out of work. Any agency with such power must be above reproach - especially as that awesome power allows it to pervade the most sensitive aspects of our citizens’ private lives.”

Thursday’s disguised witnesses, known only by number, insisted on anonymity to avoid retaliation from their superiors, they said.

Witness No. 4 said that senior IRS managers judge the performance of their subordinates on the basis of collections and seizures. Such ratings are prohibited by law and IRS policy, but several agency officials said the rules are frequently violated.

“It’s just a numbers game now,” Witness No. 4 said. “It really doesn’t matter how you close a case.”

The six witnesses testifying Thursday said they bore no grudge against the agency and only wanted to illuminate IRS misconduct in hopes that it could be stopped.

“I came here today not to harm this agency, but to help it heal,” said Witness No. 2.