5 illustrations of why the tax code and IRS need to be overhauled or replaced

5 illustrations of why the tax code and IRS need to be overhauled or replaced

“Am I in Russia?” That’s what one of my clients asked as we were reviewing his options with regard to an IRS audit. “Close,” I replied. “You are facing American tax justice, which is similar to Soviet justice, but without the charm.”

The simple fact is that commonly accepted civilized notions of justice are out the window when it comes to the U.S. tax code and the manner in which the law is enforced by the all-powerful IRS.

Here are five illustrations of how tax law favors the IRS over the lowly taxpayer in disputes and/or audits.

The taxpayer is guilty until proven innocent. The presumption of innocence, the notion that you are innocent until proven guilty, is one of the most sacred principles in the American criminal justice system. But in the tax world, the reverse is true. It’s right there in Section 7491 of the Internal Revenue Code, which states:

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If, in any court proceeding, a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax imposed by subtitle A or B, the Secretary shall have the burden of proof with respect to such issue.

Shorter Internal Revenue Code: It’s up to the taxpayer to demonstrate why the burden of proof should shift to the government by introducing “credible evidence.”

The taxpayer bears the burden of proof. There is a cascade of standards of proof, ranging from “beyond a reasonable doubt” at the highest level, to a “preponderance of the evidence” (the least difficult burden). Taxpayers generally must demonstrate their innocence at a rather high level, the so-called “clear and convincing” standard. That means the taxpayer must be at a two-thirds strength level. Fairly daunting odds. As if that was not hard enough, the government tries to set the “clear and convincing” standard even higher, as you will see.

The taxpayer’s position is the only reasonable one. There is case law supporting this, but it is a foolish concept. Think about it. If the only way a person can prevail is by establishing his position is the only reasonable one, then hasn’t the clear and convincing standard been abolished and in its place a beyond a reasonable doubt standard erected? If so, individuals in a simple tax case have the same burden as a prosecutor seeking capital punishment. As William F. Buckley, Jr. might have said, reductio ad absurdum.

The taxpayer must clearly and unambiguously prove his case. Another set of buzz words that have support in some courts, but ramp up the already onerous burden people face.

A tax provision of long standing must be assumed to be correct. Yet another buzz phrase government authorities rely on. But why? Imagine if Ferdinand and Isabella had  said, “Sorry, Señor Columbus. People in authority have believed the earth is flat for 500 years, so no undertaking to the contrary can be considered.”

The answer to all these problems is to simplify the tax code and/or revamp the IRS.

Kenneth T. Zemsky

Kenneth T. Zemsky

Kenneth T. Zemsky is a managing director of Andersen Tax and teaches tax law at Rutgers University. He is the author of the recently published novel, "The Nation’s Hope," which focuses on the 1965 New York City mayoralty campaign. You can follow him at KennethTZemsky.com


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