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MARCH 25, 1995

IRS Should Have to Prove Case In Audits, Ohio Lawmaker Says


By Dave Skidmore

Congress is considering turning the tables on the Internal Revenue Service. Proposed legislation would force the agency to prove that taxpayers are wrong in disputed cases, rather than requiring filers to prove they are right.

IRS Commissioner Margaret Richardson warned the House Ways and Means oversight subcommittee yesterday that the change would destroy the tax system.

"You might as well repeal the income tax law and pass the hat,'' she said.

If challenged in audits, taxpayers must now produce receipts and other documents justifying their deductions. The proposed change would send the IRS on a long and expensive search for evidence disproving the claim of an uncooperative filer.

Richardson and Deputy Assistant Treasury Secretary Cynthia G. Beerbower said they support many congressional proposals for strengthening taxpayer rights but adamantly oppose a bill, sponsored by Representative James Traficant, D-Ohio, which would shift the burden of proof in all civil tax cases.

The IRS already has the burden of proof in criminal cases and civil cases involving fraud.

"An accused mass murderer has more rights than a taxpayer fingered by the IRS,'' Traficant said in a statement to the subcommittee. "Jeffrey Dahmer was considered innocent until proven guilty. Mom and Pop small business owners, however, are not afforded this protection.''

However, Beerbower said, a "long-standing and well-established legal doctrine'' in all civil proceedings, not just tax cases, is that the party that has control of the facts has the burden of proof.

Shifting the burden of proof would force the IRS to intrude into taxpayers' lives far more than it does now, interviewing people other than the taxpayer and summoning information from third parties such as banks and credit card companies, she said.

"As a result, the simplest audit would become a costly nightmare if the taxpayer refuses to cooperate,'' she said. "For example, if a taxpayer claims a child as a dependent and the IRS suspects the child does not exist, the IRS would be forced to interview neighbors.''

Richardson said that the change would make it easy to claim phony deductions, to the disadvantage of honest taxpayers, and that "passage . . . would destroy our voluntary compliance system.''

Four former IRS commissioners -- Donald Alexander, Lawrence Gibbs, Fred Goldberg and Sheldon Cohen -- submitted testimony backing Richardson's position.

Traficant, a longtime crusader against the IRS, has his salary garnisheed to pay for a tax case he lost in the mid-1980s. It stemmed from a criminal charge, for which he was acquitted, when he was a candidate for county sheriff in Ohio.

Subcommittee members reacted coolly or not at all to his idea, but said they may seek to reduce taxpayers' burden of proof in one area. Taxpayer Bill of Rights legislation enacted in 1988 allows taxpayers who win their cases with the IRS to seek reimbursement for legal fees.

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