Chairman Roth, and Senators of the Finance Committee, thank you for this opportunity to appear before you this morning to present my personal experience with the Internal Revenue Service. I am Mrs. Nancy Jacobs. My husband, Dr. Fredric Jacobs, is a practicing optometrist from Bakersfield, California and we have operated an office for approximately 30 years.
When my husband first opened his practice in March 1965, in Stockton, California he was assigned an Employer Identification Number, or EIN, for reporting purposes to the IRS.
Between 1977 and 1979, my husband closed his practice, but in November 1979, he re-opened in a new office in Riverside, California. We applied for a new EIN number since he was re- starting the practice at a new site and knew we needed an EIN for tax reporting purposes. What neither of us knew at the time was that an EIN is like a social security number, it never needs to be changed or renewed. The original EIN had been assigned to us forever. However, when we requested a new EIN from the IRS, it complied with the request and the IRS provided us with a second number. But what we didn't know at the time was that the EIN the IRS provided to us in 1979 actually belonged to someone else, someone we would not be aware of until 1992.
By March of 1981, we were unexpectedly assigned yet a third EIN from the IRS, via a pre-printed label on a quarterly 941 tax return. However, we continued to use the number we were assigned in 1979 on all of our quarterly tax payments.
In June 1981, out of the blue -- without warning, the IRS placed a lien against us for $11,000 for unpaid payroll tax deposits. We couldn't find anyone with the IRS who would do us the courtesy of checking the lien against the EIN we had been using.
After attempting to deal with the IRS, my husband and I were so intimidated by the tactics used by the IRS that we agreed to pay the IRS $250 a week until the balance was paid. For anyone who has not had to deal with the IRS under such circumstances, you probably cannot understand why we would agree to pay $11,000 that we knew we did not owe. Only after you have experienced what my husband and I endured would you consider paying an IRS bill that you don't owe.
Even after the $11,000 was paid we continued to receive subsequent liens from the IRS. My husband and I were forced to comply with these IRS demands under the penalty of experiencing further enforcement actions with the possibility of the IRS closing down my husband's practice! We were forced into debt, our credit was damaged and the mental stress was overwhelming. During all this time we could not convince anyone at the IRS that we did not owe these taxes. In fact during one of our visits to the San Diego IRS Office we were flatly told by one IRS employee that she was too busy to help us anymore and refused any additional assistance in straightening out our account. We were then informed by her supervisor that this matter would be cleared up. It was a kind offer but that was all it was. Our nightmare continued. By 1987, we had received additional liens totaling roughly $15,000.
In 1982, we did seek the assistance of a Congressional representative. He contacted the IRS on our behalf requesting that the IRS stop all collection efforts, and for them to contact us in an effort to straighten out the problem. We did hear from the IRS in 1982. We met with someone from the Laguna Nigel office who told us that we had received four refund checks. We assured him that we had only received one for approximately $3,600. He promised that he would get copies of the other checks, but unfortunately he never did.
The only other consistent occurrence over the course of the years was the occasional appearance of the original EIN number on notices we received from the IRS, while all the others reflected my second E1N number. My husband and I began to wonder exactly where the taxes were going that we had been faithfully paying. No one with the California IRS offices that we contacted could explain it either, but they were adamant that whatever the reason, we owed those taxes!
By 1987, we again contacted a Congressional representative seeking intervention on our behalf. This time we did hear from the IRS but that, too, lead to another dead end.
In 1992, a patient of my husband's, a tax attorney, agreed to review our case and was the one who discovered the confusing EINs going back to 1979. Someone with a name quite similar to my husband's but with an entirely different social security number shared the EIN. Back in 1979, had the IRS employee properly informed us that we didn't need a "new" EIN, or at least checked the status of the number, this 17 year nightmare would have been avoided.
Mr. Chairman, since 1992, when we first discovered the mistake IRS had made, my husband and I have been trying to get our money back from the IRS -- money that was wrongly taken from us by the IRS -- but to no avail. We have never received the money from the IRS as we had been promised. We estimate the IRS still owes us over $10,000, if not more, plus interest, stemming from their wrongful liens, penalties and interest.
Only in 1994, in an encounter with the IRS' Bakersfield Office did we meet the first truly helpful IRS employee who was willing to work with us and investigate the cause of our problem. We were informed that our problem was indeed due to a clear case of an erroneous Employment Identification Number. Unfortunately, this employee became ill and our case file was apparently "lost." After yet another Congressional inquiry on our behalf in 1996, we learned that our "lost" case file was really not "lost" at all but had been referred to an IRS employee at the IRS' Fresno Service Center. Unfortunately, she was not responsive to our case and almost another year languished without satisfaction. Out of sheer frustration, my husband and I went to our local newspaper, and told our story.
Roughly 2 hours after the story appeared, that same IRS employee was on the telephone informing us that, "..We discovered that you were right..." and proceeded to discuss how our money would be returned to us.
We then received a fax from her stating that all liens had been lifted and the IRS was at fault for the incorrect EIN. However, when this IRS employee extended her "..sincere apologies...," in writing, she did not mention a refund of the money the IRS unfairly took from us. She did state, however, "..The Liens previously filed under Employer Identification Number XXXX were not correct and should not have been on Dr. & Mrs. Jacobs' account. The liens were not for their liabilities. Within the next 6 to 8 weeks, Dr. & Mrs. Jacobs will be in full compliance on all taxes both individual and business ...."
Mr. Chairman, both my husband and I are certainly pleased and greatly relieved that this 17 year confrontation with the IRS is almost over. But we cannot agree with the IRS that it is completely over. We would appreciate receiving our refund with the same enthusiasm and speed with which the IRS collected it. However, the real reason I am here this morning is to bring to light what my husband and I feel is an attitude that permeates the IRS. It is one of manipulation and control of the taxpayer. Both my husband and I were met with indifference when dealing with the IRS Offices. IRS employees were not interested in listening to us, much less investigating our assertions. They assumed we were guilty -- that we owed the money! The IRS is beyond the law. Congressional inquiries on our behalf met with only limp responses. Mr. Chairman, an agency with this type of power over American citizens requires someone to rid it of such abusive conduct. My husband and I commend you for your effort here today to accomplish that goal. Thank you.
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