IRS Reform: It's Not Over Yet for This Senator

With the tax season in full swing, some 238,000 Americans call the Internal Revenue Service each day with questions about filing their tax returns.

But almost half the calls go unanswered - and when citizens do get through, IRS employees give out wrong information about 20,000 times daily.

Legislation to transform the IRS from a stern, pencil-packing law-enforcement agency to a friendly customer-service center has already cleared the House, and the president has indicated he would sign it. Now, though, it's the Senate's turn to take a crack at the IRS - with a bill that may push reform even further.

To be sure, new IRS commissioner Charles Rossotti has initiated a series of administrative reforms, including public forums in cities across the US to help people with their tax questions.

But for Senate Finance Committee chairman William Roth (R) of Delaware, neither the agency's own reforms nor the House bill goes far enough.

"My IRS reform bill is the most comprehensive overhaul of the Internal Revenue Service ever put forward," says Senator Roth, whose committee this week is working on an IRS restructuring bill. "It is aimed at protecting both taxpayers and employees against those inside the agency who have abused the awesome power of the IRS."

Roth plans hearings in late April to spotlight "wrongdoing or other problems" within the IRS, says a committee spokeswoman. It is likely that the full Senate will vote on the bill in May or June.

Still, Roth's ideas would carry a far bigger price tag - $20 billion over 10 years compared with the House bill's $5 billion. Moreover, a group of conservative Republicans has written Roth demanding that no taxes be increased to pay for the reforms.

The House bill, passed last fall, calls for the burden of proof to fall upon the IRS - not the taxpayer - when a dispute goes to tax court. In addition, it allows taxpayers to sue the agency for as much as $100,000 for negligence. "Innocent spouses" - usually women separated or divorced from their husbands - would gain protection from tax liability that spouses accrue without their knowledge during the marriage.

The House bill also extends the attorney-client privilege to accountants and tax advisers, and provides grants for taxpayer clinics to help low-income Americans. It creates an IRS oversight board, including eight private-sector experts, to review the agency's management and annual budget request.

By contrast, the more ambitious Roth bill would:

Reorganize IRS units so that they serve taxpayers with similar needs rather than taxpayers living in a certain region of the US.

Give the oversight board greater independence - and reserve no seat for the Treasury secretary. The White House got behind the House bill only after the Treasury secretary was added to the oversight board.

Change the burden of proof in court cases to the IRS when it uses statistics to determine a taxpayer's income or wants to impose penalties.

Go even further in protecting innocent spouses by making them responsible only for their own taxes.

Require the IRS to suspend interest charges and other penalties when it fails to notify a taxpayer of a problem within a year after a return is filed.

Force the IRS to fire workers guilty of certain misconduct.

Both Democrats and Republicans are concerned about how Roth would pay for his proposals. "There's no possibility of passing something like that," says Sen. Bob Kerrey (D) of Nebraska, a reform advocate who supports the House legislation.

HE and other Senate Democrats criticize Roth for taking so long to come up with a bill. If American taxpayers have to file by April 15, they say, Congress and the president should meet the same deadline. "What the Republican leadership is telling the American people is ... just forget about any IRS reform for the foreseeable future," says Senate minority leader Tom Daschle (D) of South Dakota. "I don't think that's the message the American people want to hear."

But Roth makes no apologies. "I made it very clear I would not introduce a bill until I was satisfied that it would make effective and lasting reform to this agency," he says. "This process has required hundreds of decisions, scores of revenue estimates, and months of work - and is well worth the wait."