What’s in a label? Plenty, when it comes to the IRS

On Behalf of | Sep 18, 2015 | Tax Controversies


While it’s highly unlikely that many, if any, Americans are singing the praises of the Internal Revenue Service; most reserve their criticisms for private conversations and those among friends and work colleagues. For those brave enough to vocalize and demonstrate their displeasure with the IRS and the agency’s many confusing and potentially flawed processes, the IRS takes notice.

Previous to 1998, the IRS routinely and openly kept track of individuals who contested or protested IRS regulations, rulings and laws by labeling them in its database as “illegal tax protesters”. Congress’ 1998 decision to ban the IRS from using this and other potentially stigmatizing labels was aimed to ensure the agency wasn’t biased or unfair in its dealings with and rulings concerning individual taxpayers.

In many cases, taxpayers who previously questioned or protested the agency’s actions were later tax-compliant or “stopped doing things the IRS thought were unreasonably against the tax system.” However, even though the illegal tax protester label was banned from use roughly 18 years ago, a 2015 audit of the IRS revealed that some within the agency still use this and other similarly derogatory labels to describe taxpayers.

While even the IRS conceded to stop using the label of illegal tax protester, the agency still readily labels taxpayers with other damaging markers including aggressive, delinquent and frivolous. What’s more, it turns out that earning the distinction of one of these labels can end up costing a taxpayer dearly. For example, a so-called frivolous taxpayer may be subject to a “20 percent accuracy-related penalty…and a whopping 75 percent civil fraud penalty.”

Source: Forbes, “IRS ‘Tax Protester’ Label Is Harder To Delete Than Lois Lerner Emails,” Robert W. Wood, Sept. 17, 2015