Clinic celebrates ten years of tax law assistance to low-income community
February 09, 2010
Few government offices receive more of the public’s scorn than the Internal Revenue Service. Particularly given the current economic climate, the April 15 tax deadline is looming large for millions of taxpayers across the country. For a decade, the Lewis & Clark Low-Income Taxpayer Clinic (LITC) has been helping those most in need of assistance, mitigating conflicts with the IRS and seeking positive resolution for all parties.
The clinic represents low-income individuals in the Portland area, providing free legal representation on cases involving controversies with the Internal Revenue Service including audits and attempts to collect unpaid taxes. Student participants work under the supervision of an experienced tax attorney who is a full-time member of the law school faculty.
Jan R. Pierce, clinical professor of law, has supervised the LITC since its opening in May, 2000. Before joining the law school faculty, he served 27 years as an attorney with the Chief Counsel’s Office of the Internal Revenue Service. Dannielle Booth, who graduated in December 2009, worked at the legal clinic for a year while a Lewis & Clark law student. Pierce and Booth recently talked about their work and how the current economy has affected the clinic’s caseload.
What do you find compelling or rewarding about working on tax issues?
Pierce: The most satisfying part of my job here at the clinic is helping taxpayers who simply have nowhere else to turn. That is, many taxpayers come to us with problems that are easy to fix, but would not be resolved if we were not here to help them. This is especially true in the collection and innocent spouse area.
It is also very rewarding to me to teach and counsel the law students in the tax system. What we do at the clinic is represent clients who have tax controversies with the IRS. As such, it is vastly more important to know how the system works than to be a substantive tax expert. This is what the students learn, and I believe that I am in a position to give them broad and sometimes unusual insight into the system and how to use it.
Booth: The possibility to craft creative arguments abounds. In a short time, you can become an expert on one small issue, but there are so many more to explore. The IRS attorneys are top notch, and though they represent the adverse party, many of them want the right result even if it means your client comes out on top.
Has your experience leading the clinic changed your perception about tax issues generally or your 27-year tenure with the IRS specifically?
Pierce: I worked for the IRS as an attorney for some 27 years, and I have been the supervisor of the Low Income Taxpayer Clinic at the law school for almost ten years now. This experience has given me a very broad and wide-reaching understanding of the system. I do not believe that my perception of tax issues has changed going from representing the government to representing taxpayers.
The IRS is a huge organization, and like any big organization, there is a bad apple or two. However, IRS employees are just people, and though you may not agree with the decision an IRS employee makes, it is never personal. I tell the students that one big advantage of practicing tax law is that your relationship with the other side is almost never acrimonious. As a representative, you simply take the next step in the case.
A problem that I have noticed since I started working for low income taxpayers, is that these types of taxpayers sometimes simply get “chewed up” by the system when the IRS makes a mistake concerning their account. The taxpayer often ignores the problem because they don’t know what to do, and of course, if they have nothing there is nothing the IRS can do anyway. In the “old days” it was very difficult to fix IRS “account problems.” Today we can normally fix these problems fairly easy by going through the IRS Taxpayer Advocates Service (TAS). The TAS office nationally is essentially an ombudsman, whose job is to “fix” problems between the IRS and taxpayers. The TAS office in Portland gives us outstanding assistance.
How has the downturn in the economy affected the clinic’s work?
Pierce: Taxpayers who are self employed and whose businesses begin to struggle, frequently cease to make estimated tax payments through the year. They end up using the money they should have paid to the IRS during the year, to stay afloat. This means that at the end of the year, there is no money to pay the tax. This has always been a problem to one extent or another. However, the problem has become worse the past couple of years, given the state of the economy. These cases usually show up in our office as collection cases, not court cases.
During the past two years, we have also seen an increase in discharge of indebtedness cases. That is, when a debt is forgiven, this generates discharge of indebtedness income. Most taxpayers are very surprised to learn that they have income when a creditor agrees to take less than what is owed to satisfy a car loan, credit card debt, etc. Of course, we have also seen an increase in collection cases, due to the economy.
What challenges are clients facing that end up getting them into trouble with the IRS?
Booth: The average American is not going to sit down with the Internal Revenue Code to answer his or her tax questions. The tax system is complex. People are too busy making a living to figure it out. They prepare their taxes based on what they heard someone say or what the do-it-yourself program suggests. They send in their returns and hope for the best. Most of them do not even know what they did wrong to end up in court in the first place.
What kinds of skills do law students get to hone by working at the clinic?
Pierce: The students get to work on practical skills—skills that they would need to handle any type of case. In my opinion, the most important things that someone dealing with tax controversies can learn at clinic is how the IRS works, what authority the IRS person you are dealing with has, what to do next, when can you argue an issue in court, etc. One of the things I tell the students is that when a taxpayer is dealing with the IRS, the IRS is calling the shots and making the decisions. Once we are in court, the IRS is no longer in charge and making the decisions—they are just a party to the litigation.
Booth: The clinic experience exposes some students to their first working experience in an office. For others who led careers before their journey in law school, it provides the opportunity to use classroom knowledge in a practical way. Much of the day-to-day practice of law involves the ability to communicate effectively with different people. Clinic students conduct that communication in a variety of ways—face to face, over the phone, in writing, and in the courtroom. Thus, working at the clinic hones presentation, legal writing, and trial preparation skills.
Given the hands-on work you and your colleagues are doing, are their policy changes you’d make at the federal level to improve the tax system?
Pierce: From a policy standpoint, the big area where I believe the IRS needs to get with the program is in the innocent spouse area. If a husband and wife file a joint income tax return, they are both liable for the tax, even if one has no income. Innocent spouse relief has to do with under what circumstances a spouse can be relieved of that liability. [In many of the cases we handle] the husband is self employed, the wife has no income, and a large part of the unpaid tax is the husband’s self employment tax. The bottom line is in many of these cases a large amount of the unpaid tax comes from the husband’s self employment tax - his social security - for which he will eventually reap the benefit of in the form of social security benefits.
I realize that we have seen only a small snapshot of innocent spouse cases nationally at our clinic during the past ten years, however from our perspective it appears that centralized Exam and centralized Appeals have adopted the old drug slogan in response to taxpayer’s request for innocent spouse relief, i.e., “just say no.”
Booth: The tax code is a vast web—deductions for this, credits for that, numerous exclusions, different tax rates, many policy goals, several political agendas. Taxpayers need help navigating the tangles. Maybe the answer is simplification; maybe the answer is education—maybe a little of both are in order.