By: A.J. Cook


Most IRS employees are professional and reasonable - but not all. Once in awhile taxpayers encounter one that's absurdly irrational.

Vince Han, a struggling small business owner, faced the threats of an IRS Collection Officer gone berserk.

Vince and his wife, Kathy, sold antique reproduction clocks made by two Korean companies, Daijin Enterprises and Dong Bang Enterprises. At first, the Glenview, Ill., couple did quite well with their business, Clocks Ltd., selling even to customers like American Express.

But then they received a large number of defective clocks form Daijin and Dong Bang. This caused a financial squeeze. Clocks issued refunds, including $100,000 to American Express, with no chance of recovering money from the two suppliers.

While Clocks was on the brink of disaster, an IRS agent showed up to examine the records. The meeting went smoothly. The agent asked for a second meeting at the taxpayer's home. This meeting, at first attended by two agents, was businesslike and cordial. Then the IRS supervisor arrived.

The tall, imposing man with dark sunglasses objected to every question, even those asked by the other agents. After five minutes he stood up, pointed at Vince Han and shouted: "You have to pay $70,000 now; if you don't pay, you are going to jail.... I will put you in jail." After his 15 minute tirade, he and the other two agents left.

A week later, Han received a call from his accountant. The supervisor was there. Han could hear him yelling that if the IRS didn't get the $70,000, it will take Han's home. Han asked that he be allowed to hire a lawyer. The supervisor refused.

Han hired an attorney anyway, who met with the supervisor. Now the supervisor demanded $178,388, which included a fraud penalty, plus interest. The lawyer asked for time to become familiar with the case. The supervisor refused.

The agency issued a report. As to the issue of fraud, it showed no evidence but said only Han "was not an honest taxpayer."

Han rushed his case to the IRS Appeals Division. After the appellate conferee studied the case, and with little or no debate, he ruled there was no fraud, and Han didn't owe any taxes.

Then the business owner got on the offensive. He petitioned a court to recover his legal costs. It didn't take the judge long to see that the government's case was unreasonable and he awarded Han $46,000. The judge called this "a textbook example of how the IRS should NOT conduct an examination."

This case again illustrates the problem at the IRS–especially in the Collection Division. Hopefully, the Commissioner, now being prodded by legislation, will continue his drive to uproot people like the wretched supervisor. The public should remain vigilant lest weeds again sprout and mar this important agency.

The Moral: Abusive IRS employees deserve a time out–a permanent time out.


A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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Released 6-7-99