When tax season begins, the IRS to make a show using its newly increased budget to improve the agency’s “customer service,” mainly by trying to answer questions from confused taxpayers more than 13 percent of that time. His biggest challenge will be convincing Americans that they qualify as IRS clients in any sense.
After all, the IRS does not provide goods and services that anyone would voluntarily choose to buy. Its main function is to separate people from their money, and its main tool is fear, as shown in the example A fine of $2.1 million it was imposed on an 82-year-old grandmother for not submitting the questionnaire on time.
Monica Toth was born in Buenos Aires, where her Jewish father ended up after fleeing the Nazis in the mid-1930s. She immigrated to the United States in the early 1960s and eventually became a citizen.
Toth’s father was a prosperous businessman in Buenos Aires, and shortly before his death in 1999, he deposited several million dollars for her in a Swiss bank account. This made Toto subordinate to a requirement that Americans report foreign accounts containing more than $10,000 on a one-page form known as an FBAR.
Toth, who filled out her tax returns by hand using forms she obtained from her local library, says she was initially unaware of the requirement. When she discovered her mistake in 2010, she tried to correct it by filing FBARs for previous years, but those documents were somehow sent to the Centers for Medicare and Medicaid Services instead of the Treasury Department.
An IRS audit in 2011 found that Toth sometimes overpaid and sometimes underpaid her income tax. In all, she owed about $40,000 in taxes and penalties.
But it did not end there. Because the IRS concluded that Toth’s FBAR waiver was “willful,” which courts interpret as reckless conduct as well as willful misconduct, she was subjected to what the National Taxpayer Advocate describes as “draconian fines” which “among the harshest civil penalties a government can impose.”
A “willful” FBAR violation carries a penalty of either $100,000 or half the account balance, whichever is greater. Toto’s fine was $2,173,703.
This staggering sum was unrelated to the seriousness of Toth’s offense or to any harm suffered by the government. She argued that this violated the Eighth Amendment’s ban on “excessive fines.”
The US Court of Appeals for the 1st Circuit disagreed. Contrary to Supreme Court precedent and decisions by other federal appeals courts, the 1st Circuit last year concluded that Toto’s punishment did not qualify as a penalty because its purpose was “corrective.”
As noted by the Institute of Justice in the Supreme Court petition she filed on Toth’s behalf, that characterization was entirely implausible, since the government itself described the purposes of FBAR fines as punishment and deterrence. Judge Neil Gorsuch emphasized this point when the court refused to listen Toto’s turn this week.
“The concept of ‘non-punishment’ is a ‘contradiction in terms,'” Gorsuch wrote in his dissent. “The government did not calculate Ms. Toth’s fine by taking into account any losses or expenses she incurred. The government imposed the fine to punish her and thereby deter others.’
Such deterrence is critical for the IRS, which understands that people prefer to keep their hard-earned money and seeks to counter that powerful instinct by showing egregious examples of taxpayers breaking the rules, even if their violations are occasional, relatively minor, or both. and other things. Given such policies, the fiction of taxpayers as customers is hard to sustain.
Toth certainly doesn’t consider himself an IRS client, any more than the average taxpayer who faces the frustration of complying with a byzantine tax code and the anxiety of a grueling, life-ruining audit each year. Against this reality, the agency’s promises to answer the phone a little more often don’t mean much.
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