Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts

Thursday, June 26, 2014

IRS's "Super creditor" status

Bryan Skarlatos recently testified to the House Ways & Means Committee about the IRS's "Super creditor" status via its federal tax lien power. Given the global nature of the US tax jurisdiction over nonresidents with US person status, the powers of the IRS to seize assets in satisfaction of tax debts is of increasing interest. I think this power is very likely to be ill-understood by those outside the United States. Looking ahead at life under FATCA, consider that soon the IRS will have the information to start assessing tax debts on its global diaspora, and then we will see what happens.

The Internal Revenue Service (the “Service”) is a “Super Creditor” because Congress has given it powers to collect money and property that far exceed those of any ordinary creditor. Typically, a creditor who is owed money cannot just take property of the debtor. Instead, the creditor must first bring a lawsuit, obtain a judgment, and then invoke the power of the court to execute on the judgment by seizing the debtor’s property, usually with the help of a court order or a public servant such as a marshal. In contrast, when taxes are assessed, the Internal Revenue Code automatically creates a lien in favor of the Service in a taxpayer’s property. Then, the Service has the unique and powerful ability to levy on or seize property that is subject to a federal tax lien. In addition, the Service can sue in federal court to collect taxes. 
The first step in the tax collection process is the assessment. In general, the Service cannot attempt to collect from a taxpayer until a tax has been assessed.
The Internal Revenue Code gives the Secretary of the Treasure the authority to assess tax. A tax is assessed when it is recorded as a liability, or account receivable, on the Service’s records. 
Once a tax has been assessed, the Service is required to notify the taxpayer that the tax has been assessed and to demand payment of the tax. The notice and demand for payment must be made within sixty days of the assessment. The notice and demand must be left at the taxpayer’s home or place of business, or sent to the taxpayer’s last known residence. Failure to pay an assessed tax after notice and demand for payment has been made gives rise to a federal tax lien and the Service’s ability to collect through levy or seizure of property. 
Federal Tax Lien 
If any person liable to pay a tax fails to pay after notice and demand, the amount not paid, including interest and penalties, becomes a lien in favor of the United States upon all property and rights to property belonging to such person. The tax lien is the mechanism that gives the Service rights to the taxpayer’s property. However, the lien itself does not transfer any value to the Service. As discussed below, a levy is the tool used to transfer the actual property to the possession of the Service. 
A federal tax lien arises against any person liable for the tax and attaches to any interest in property that the person may have. A tax lien also attaches to any property the taxpayer may acquire in the future. This is another way of saying that the tax lien attaches to after acquired property. 
The law of each individual state determines whether and when a taxpayer has an interest in some type of property. Federal law determines the extent to which the federal tax lien attaches to that interest. For example, the tax lien attaches to a taxpayer’s interest in a joint bank account to the extent that the taxpayer can withdraw money from the account. Similarly, if under state law, one spouse has a right to community property, then the tax lien attaches to that spouse’s interest in community property. Or, if one spouse has an interest in property held as tenants by the entirety, then the federal tax lien can attach to that interest. A federal tax lien attaches to interests in personal or real property, bank accounts, retirement accounts, Social security benefits, alimony (but not child support) payments, beneficial interests in trusts, contingent interests, future interests, and intangibles such as accounts receivable, trademarks, licenses, royalties and franchise rights.  
The federal tax lien relates back to the date of assessment. However, a federal tax lien does not have priority over purchasers for value, holders of security interests, mechanics lienors or judgment creditors until a Notice of Federal Tax Lien (a “Notice of Lien”) is filed. The Service may file a Notice of Lien to obtain priority over these holders of interests through the general rule of “first in time, first in right.” The interest that is perfected first has priority if and when the property rights are sold or seized. 
State law determines where a Notice of Lien must be filed to be effective. Generally, Notices of Lien are filed with clerk of the court in the county where real property is located, with the clerk of the court in the county where the taxpayer is located in the case of personal property, or with the clerk of the federal district court in the district where the real property or taxpayer is located. Filing the Notice of Lien provides constructive notice to anyone else who may hold or acquire an interest in property and gives rise to the “first in time, first in right” rule. 
The Notice of Lien is merely a device that provides deemed notice to other interested parties for purposes of establishing priority. The federal tax lien exists independently from the Notice of Lien and there is no requirement that the Service even file the Notice of Lien. However, if the Service does file a Notice of Lien, it must give the taxpayer written notice that the Notice of Lien is being filed with five days of the filing and give the taxpayer an opportunity to request a Collection Due Process hearing (a “CDP Hearing”) to contest the filing of the Notice of Lien. Requesting a CDP Hearing does not stop the filing of the Notice of Lien; it just gives the taxpayer a forum to request that the lien be lifted. 
Once a federal tax lien arises, it generally is valid until the taxpayer’s liability is satisfied or until the time for enforcing the lien expires. Generally, an assessment may be collected by levy or court proceeding within ten years after the date of assessment. The ten-year period can be extended under limited circumstances.The filing of a Notice of Lien, by necessity, is open to the public and can harm a taxpayer’s credit standing and can affect business relationships by, for example, triggering a default under certain credit agreements, etc. 
Levy and Seizure 
If any person liable to pay a tax fails to do so within ten days after notice and demand, then the Service may collect the tax by levying on all property owned by that taxpayer, or on which there is a federal tax lien for the payment of such tax. Levies and seizures are ways in which the Service takes possession of property or rights to property. Levies and seizures are essentially the same thing. The term “levy” is typically used when the Service takes possession of intangible property or rights to property and the term “seizure” is typically used when the Service takes possession of real or personal property. A levy or seizure is a provisional collection device, meaning that disputes over ownership, priority or even liability for the tax can still be disputed after the levy or seizure. 
Two notices must be issued before the Service can execute a valid levy or seizure. First, the Service may not attempt any collection until ten days after a notice and demand for payment of the tax. This notice and demand can be the same notice and demand that must be made within sixty days after the assessment as described above. Typically, the Service sends two or three notices and demands for payment of taxes before it proceeds with the levy process. 
Second, the Service must notify the taxpayer in writing of its intention to levy on the taxpayer’s property or rights to property at least 30 days before the date of the levy (the “Notice of Intent to Levy”). The Notice of Intent to Levy must be given either in person, left at the taxpayer’s dwelling or usual place of business, or sent by certified or registered mail, return receipt requested, to the taxpayer’s last known address.Like the Notice of Tax Lien, the Notice of Intent to Levy must inform the taxpayer of the right to request a CDP Hearing within 30 days of the Notice of Intent to Levy. At the CDP Hearing, the taxpayer can challenge the appropriateness of the collection activity and, in some cases, the validity of the underlying tax liability. If the taxpayer timely requests a CDP Hearing, the Service may not proceed with levy until the CDP Hearing is complete. 
The Service can use a levy to take any property subject to the federal tax lien. This includes just about any kind of property in the possession of the taxpayer or property in the hands of a third party to which the taxpayer is entitled. The Service can levy property from a third party simply by serving the levy on that third party. No special notice or procedure is required to levy property from a third party. 
Typically, a levy only reaches property in possession or rights in existence as of the date the levy is issued. Unlike a federal tax lien which attaches to after-acquired property, most levies do not reach after acquired property. Thus, a levy served on a bank will reach the balance in the account on the day of the levy and does not reach a deposit made the day after the levy. However, there is an exception to this rule. A continuing levy can be issued on salary and wages. A continuing levy is like a vacuum cleaner that continues to sweep up money as it is paid to the taxpayer. 
There are very few types of property that are exempt from a levy. State laws that provide homestead exemptions, protect certain types of retirement accounts, or limit the amount of a person’s salary that can be garnished, do not trump the federal levy laws and are ineffective against the Service’s power to levy. Federal law provides limited exemptions for things like school books, tools of trade, wearing apparel, fuel, provisions, furniture and personal effects, unemployment or workers compensation benefits and a minimum amount of wages.As noted above, the Service typically has ten years from the date of assessment to collect a tax by levy. 
Judicial Proceedings 
In addition to the administrative lien and levy procedures described above, the Service can also request the Tax Division of the Department of Justice to sue a taxpayer in federal court to collect a federal tax liability. Federal courts have subject matter jurisdiction over suits to obtain judgments pursuant to the Internal Revenue Laws. While an assessment and lien are not necessary prerequisites for such suits, there usually is an assessment and related federal tax lien. The Service sometimes uses the judicial remedy to reduce a federal tax lien to judgment when the statue of limitations for collecting administratively by levy is about to expire. If the Service obtains a judgment against the taxpayer, a whole new statute of limitations for collection on the judgment begins to run. 
The Service also uses judicial remedies to sue third parties who have failed to turn over property in response to a levy, to establish liability against a transferee of property, or to recover a refund of taxes that was mistakenly paid to a taxpayer. 
Taxpayer Defenses 
There are many ways that a taxpayer can defend against the collection of taxes. The CDP Hearing requests referred to above are some of the most powerful tools that a taxpayer can use because, while a CDP Hearing request does not stop the filing of a Notice of Lien, it can stop a levy pending the outcome of the CDP Hearing. Of course, if the Service collects money or property improperly, the taxpayer can sue for a refund. 

Tuesday, August 13, 2013

Latest IRS Statistics of Income on Individual Tax Returns

The IRS has issued its latest SOI reports, including the 2011 Individual Income Tax Returns (Publication 1304)These are always interesting. This year's data shows that 145 million individual income tax returns were filed in 2011, about 108M showing a taxable income amount, and 95M showing income tax, for total revenues of just over $1 trillion from the individual income tax. Some highlights:
  • salary or wage income: 119M returns, $6T
  • unemployment comp: 13M returns, $92B
  • social security benefits: 25M returns, $490B
  • foreign earned income (i.e. residents of other countries): 445K returns, $28B
  • gambling earnings: 1.9M returns, $26B
The IRS also issued 2010 Corporation Research Credit Tablesderived from Form 6765, Credit for Increasing Research Activities, and 2010 Corporation Depreciation Dataderived from Form 4562, Depreciation and Amortization.

Friday, July 12, 2013

FATCA delayed again, this time Treasury giving itself 6 months to get the house in order. Lesson: internationalizing a unilateral legal regime is really difficult.

Treasury issued a new Notice 2013-43 today, pushing the withholding deadline to July 1, 2014 (was January 1 2014), the portal opening to August 19, 2013 (was July 15), and the deadline to register as a FFI is now six months from when the portal opens, which I believe would be February 19, 2014 (was October 25, 2013) (but for some reason this date doesn't seem to be indicated in the Notice, instead it says "On or after January 1, 2014, each financial institution will be expected to finalize its registration information by logging into its account on the FATCA registration website, making any necessary additional changes, and submitting the information as final. Consistent with this 6-month extension, the IRS will not issue any GIINs in 2013. Instead it expects to begin issuing GIINs as registrations are finalized in 2014"). Accordingly, no GIINs will be issued in 2013, IRS "expects to begin issuing GIINs as registrations are finalized in 2014," with the first posting of the compliant FFI list by June 2, 2014.

All of this is going to require Treasury to amend the regulations and the model IGAs to adopt these rules, but taxpayers are advised they can rely on the Notice until that happens. Here is the explanation:
Comments have indicated that certain elements of the phased timeline for the implementation of FATCA present practical problems for both U.S. withholding agents and FFIs. In addition, while comments from FFIs overwhelmingly supported the development of IGAs as a solution to the legal conflicts that might otherwise impede compliance with FATCA and as a more effective and efficient way to implement cross-border tax information reporting, some comments noted that, in the short term, continued uncertainty about whether an IGA will be in effect in a particular jurisdiction hinders the ability of FFIs and withholding agents to complete due diligence and other implementation procedures. 
In consideration of these comments, and to allow for a more orderly implementation of FATCA, Treasury and the IRS intend to amend the final regulations to postpone by six months the start of FATCA withholding, and to make corresponding adjustments to various other time frames provided in the final regulations, as described in section III below.
There is also language about jurisdictions that have signed IGAs but have not yet ratified them according to their internal procedures for ratifying international agreements, in line with what the IRS agreed to in the Norway IGA, but notice that there are no hard deadlines here. Instead, FATCA partner jurisdictions get a "reasonable" period of time to get the IGAs through their respective legislative processes. I cannot see how a foreign jurisdiction would have any recourse to an unfavorable IRS determination that its internal ratification period is "unreasonable." I'd say that falls into a rather delicate area of diplomacy: I doubt the IRS will be eager to tell some other country its legislative procedures are too slow, sorry, you're off our whitelist. In any event:
A jurisdiction will be treated as having in effect an IGA if the jurisdiction is listed on the Treasury website as a jurisdiction that is treated as having an IGA in effect. In general, Treasury and the IRS intend to include on this list jurisdictions that have signed but have not yet brought into force an IGA. The list of jurisdictions that are treated as having an IGA in effect is available at the following address: 
A financial institution resident in a jurisdiction that is treated as having an IGA in effect will be permitted to register on the FATCA registration website as a registered deemed-compliant FFI (which would include all reporting Model 1 FFIs) or PFFI (which would include all reporting Model 2 FFIs), as applicable. In addition, a financial institution may designate a branch located in such jurisdiction as not a limited branch. 
A jurisdiction may be removed from the list of jurisdictions that are treated as having an IGA in effect if the jurisdiction fails to perform the steps necessary to bring the IGA into force within a reasonable period of time. If a jurisdiction is removed from the list, financial institutions that are residents of that jurisdiction, and branches that are located in that jurisdiction, will no longer be entitled to the status that would be provided under the IGA, and must update their status on the FATCA registration website accordingly. 
More details in the link to the Notice. I have some questions about the various exceptions and wheretofores, including a general sense of confusion about which of the various procedures and penalties starts when, but I'll save these thoughts for another day.

Moral of the story: it's really, really difficult to get an international tax regime going on a unilateral basis. There is a story in this about the difference in making a unilateral rule first, and then repeatedly changing it to fix all the problems that inevitably arise, versus sitting around in international networks trying to make sure the rule will work first, before trying to implement it internationally. Empirical project for international law buffs!

Monday, March 4, 2013

IRS brushes aside the constitution to make way for FATCA

In a Tax Notes International article [gated] today, Lee Sheppard discusses remarks about FATCA by Jesse Eggert, Treasury associate international tax counsel, at a March 1 IFA meeting. The most troubling aspect for me comes in the last part, when Sheppard describes a Q&A over the intergovernmental agreements and the IRS rep casually dismisses any constraints on the Treasury's attempt to bind the US with these documents as a matter of international law. There are two main questions here and both answers strike me as deeply problematic. First, there is this:

Can there be an IGA with a country that has no treaty or tax information exchange agreement? Yes, Eggert responded. It would have to be a Model II or nonreciprocal Model I . Amendments would have to be made to add information protections and assistance provisions.
With respect, this does not accord with what we have been given to understand so far about these IGAs. One need only read the preambles to the IGA models and signed agreements and consider the treaty power briefly to see that there is a very large legal difficulty here. As I have said before (and have a feeling I will be saying repeatedly), the Executive Branch cannot simply bind the US to any agreement it wants to without doing violence to a constitutional process that has been expressly laid out and subject to decades of analysis and debate by the country's most preeminent legal minds.

This is why the IRS has been very quietly implying that the IGAs interpret existing treaties. I don't agree on the merits that this could possibly be true, but the IRS needs it to be true because if it is not true, the only alternative is that the IGAs are sole executive agreements entered into by the executive branch with no congressional oversight whatsoever. That puts them on the most precarious legal ground in terms of foreign policy power in the US, and by this statement Eggert pushes them closer in that direction.

Second, there is this:
Does Treasury have authority to make IGAs? Eggert argued that IGAs are within Treasury's statutory authority to make FATCA regulations (section 1471(b)). Treasury and IGA signatories are discussing how to make domestic implementing laws consistent.
Again with all due respect, this just simply is not true as a matter of US law. The executive branch does not have the power to authorize itself to enter into treaties without congressional oversight. It is the constitution that provides the treaty power, and Congress is expressly involved. Congress could have granted the executive specific authority in this case, as it has done in other cases, but it clearly did not do so here. It is not clear what Eggert means by "making domestic implementing laws consistent." Maybe that refers to the domestic laws of treaty partner countries, which will have to change their data privacy laws to accomodate the information sought by the IRS. If so, that has nothing to do with the US. From what we have seen so far, it seems clear that the IRS is treating the IGAs as operational once the other country so indicates it is operational from their perspective (cf Mexico).

Arguing that the authority is implied within Congress' mandate to Treasury to issue regulations under 1471 is blowing a hole through the treaty power. It argues that Congress empowers the Executive Branch with treaty making authority with each and every directive to enact regulations. It makes a farce of the congressional executive agreement process that has been begrudgingly accepted as authentic by most constitutional scholars today. And never mind the old standard, the Article II treaty power. By this logic if the President wants an international agreement--any international agreement of any kind--he never needs to consult the Senate again, he can simply find some reference by the Congress directing his regulators to regulate. If Eggert is right in this assessment, it is not a stretch to see this as the beginning of the end of the Article II treaty ratification process in the United States. In other words if this works, then it's anything goes when it comes to the Executive Branch overriding domestic law with an international agreement.

Finally, I note that one other Q&A Sheppard mentions is also intriguing, though on the surface it seemed uncontroversial:
Existing IGAs will be interpreted to say that countries may choose the definition of an item in the final regulations which came later in time. Treasury will not amend IGAs wholesale when regulations change, Eggert explained.
This may seem benign--it provides flexibility despite the apparently rigid parameters of the documents (which are treaties, after all, and not so easy to just unilaterally alter at whim). But this is in fact very interesting as a legal matter because it quietly moves the world a little closer to yet another US tradition that many people in other countries find odd if not outright incompatible with international law, namely, the treatment of treaties as equal in legal status to other laws, including statutes and case law, so that treaties can be overridden at any time by a new statute or judicial decision. But it goes a further step to include regulations within that overriding scope--where they might not so clearly belong even under US law.

In other words, the IRS is saying that not only does the "last in time" rule apply to IGAs (as they would to any US international agreement), but we'll apply the last in time rule to other countries too (even if under their own laws the treaty would override later-enacted domestic laws); moreover the last-in-time rule is now extended to treasury regulations (a unilateral law that will be used to "interpret" a bilateral agreement, yet another controversial treaty interpretation position), and finally we are going to make it the treaty partner's choice to pick among the regimes to get the best result (which treats treaty partners not as negotiators in a bilateral agreement but rather in the same way as taxpayers subject to an elective regime).

It is getting progressively more difficult to keep up with the sheer volume of violations of laws and norms being undertaken by the IRS in order to get FATCA to work. It is rather disheartening (in the sense of being a scholar who studies legal process as though it matters) to realize that to many or most people involved in this project, all of these violations are just technicalities and semantics getting in the way of a result everyone wants.

Tuesday, April 24, 2012

Want to give the IRS a piece of your mind?

Now you can, by applying to be on the IRS Advisory Council.
"The Internal Revenue Service is accepting applications for membership in the Internal Revenue Service Advisory Council (IRSAC) for a three-year term beginning January 2012."
It's April, but I just got word of this via listserv today, so I take it that the positions are not filled just yet.   What do you need to qualify:

  • Application of tax law expertise to resolve complex tax issues;
  • Development and implementation of customer service initiatives and tools;
  • Systems management and improvement, and change management;
  • Establishment of successful strategic partnerships; and,
  • Demonstrable ability to examine situations from a "macro" perspective.

I am pretty sure by that last bullet point they mean "big picture" and not by applying econometrics, but I could be wrong.  The IRSAC is about you telling the iRS how you feel about it as an administration, not about you telling the IRS how you feel about the tax laws (that's what lobbyists are for).
"The Internal Revenue Service Advisory Council (IRSAC) conveys the public's perception of IRS' activities and, plays a significant role as external evaluator regarding the reorganization and its implementation."
Sorry, its unpaid:
"Members are not paid for their services. However, travel expenses for working sessions, public meetings and orientation sessions, such as airfare, per diem, and transportation to and from airports, train stations, etc., are reimbursed within prescribed federal travel limitations.
As an aside, I can't imagine what possessed the IRS to call this "open season" for membership.

Tuesday, April 17, 2012

Intuit lobbying and the tax prep market

Matt Stoller suspects that Intuit's $9 million lobbying budget is spent in the pursuit of making it harder for people to file their own taxes.  No doubt about it.  He rightfully brings up Ready Return, a program I've mentioned before.

He includes this handy chart of annual lobbying by Intuit:

But even better, he has this from Intuit's annual disclosure:

“Our consumer tax business also faces significant competition from the public sectorwhere we face the risk of federal and state taxing authorities developing software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers.  These or similar programs may be introduced or expanded in the future, which may cause us to lose customers and revenue. For example, during tax season 2010, the federal government introduced a prepaid debit card program to facilitate the refund process. Our consumer and professional tax businesses provide this service as well." 
As we well know, regulation is good for monopolies and lobbying pays off handsomely to everyone involved, but has high social costs.  

Monday, April 16, 2012

Bank of NY Wants IRS to bless its STARS

ProPublica reports on the Bank of New York foreign tax credit scheme called STARS (structured trust advantaged repackaged securities).  This is a Barclays creation and a $900 million dispute that will generate bad publicity for the IRS if it loses, and bad publicity for the bank, maybe either way.  From the report:
At issue is whether STARS was set up primarily to generate artificial foreign-tax credits, as the IRS contends; or was a legal way for BNY to obtain financing at rock-bottom rates.  The arguments heard this week will pose a crucial test of the U.S. government's resolve to rein in sophisticated corporate tax planning that has sapped vast amounts of potential revenue. Tax authorities worldwide, notably in the U.S. and U.K., are under mounting pressure to show that large companies are shouldering their share of the tax burden as part of a broader political debate about fairness and corporate social responsibility.
An investigation last year by the Financial Times and ProPublica first detailed how STARS produced tax benefits for U.S. banks beginning in 1999. In all, six banks — BNY (now Bank of New York Mellon), BB&T, Sovereign (now a unit of Santander), Wachovia (now part of Wells Fargo), Washington Mutual and Wells Fargo — participated in STARS deals with Barclays between 1999 and 2006.
...BNY has argued that the deal was a complex but entirely legal, allowing the bank access to low-cost financing from Barclays for its everyday business activities.
In the coming weeks, U.S. Tax Court will hear from the bankers, lawyers and accountants involved as well as a raft of experts. A final decision is not expected for at least several months.
With much at stake, BNY and the IRS appear to be digging in for a protracted battle. In its latest filing, BNY accuses the government of using "emotionally laden" arguments to try to deliver a "sweet sound bite." The IRS says "no rational person" would have participated in STARS if not for the foreign tax credits.
The authors conclude: "Let the war of words begin."  That about sums it up.  Will BNY do a better job than the Poriskys of the world?   

Monday, March 26, 2012

IRS Tax Stats-2011

IRS just released the IRS Data Book and updated corporate research credit statistics; no doubt there will be plenty of analysis (and spin) coming out on both of these.  I took a quick look at the corporate research credit stats and came up with this chart, which shows dramatic increases over the last twenty years, with only a slight drop off during the financial crisis:

Annual Percentage Changes in Corporate Research Credit Claims for Tax Years 1990-2009, in millions; source: IRS Statistics of Income (2012).

That's a lot of credits...a.k.a. tax expenditures.  Where is the chart that shows the economic growth attributable to these credits?  (Only kidding.  We know there is no such chart.)

Here's the raw data from the IRS website (Figure A: Annual Percentage Changes in Research Credit Claimants and Amounts for Tax Years 1990-2009):

Year Number of Credit Claimants Percentage Change Credits Claimed (in milliions of dollars) Percentage Change
2009  12,359 -3.0%  7,774 -6.4%
2008  12,736 1.5%  8,303 0.5%
2007  12,548 16.3%  8,260 13.0%
2006  10,788 -4.4%  7,311 14.9%
2005  11,290 10.2%  6,363 14.6%
2004  10,244 -1.2%  5,554 1.2%
2003  10,369 1.1%  5,488 -3.0%
2002  10,254 -1.3%  5,656 -11.0%
2001  10,389 -1.0%  6,356 -10.2%
2000  10,495 4.7%  7,079 34.0%
1999  10,020 1.7%  5,281 1.4%
1998  9,849 -7.7%  5,208 18.4%
1997  10,668 9.9%  4,398 106.1%
1996  9,709 23.3%  2,134 50.1%
1995  7,877 -13.9%  1,422 -41.3%
1994  9,150 -7.9%  2,423 30.5%
1993  9,933 28.2%  1,857 22.5%
1992  7,750 -13.9%  1,515 -4.4%
1991  9,001 3.5%  1,585 2.4%
1990  8,699  1,547

Check out the percentage change from 96 to 97 (orange highlight)!

Wednesday, March 7, 2012

Letters to the Commissioner

In 1961, IRS Commissioner Mortimer Caplin wrote a letter to the American taxpayer, which was sent with the year’s tax return forms.  It said, 
Oliver Wendell Holmes, one of our Nation’s greatest judges, once wrote-“Taxes are what we pay for civilized society… .” Later, in saying he liked to pay taxes, he did not mention whether his enthusiasm included the filling out of tax forms. But we all know that the forms as well as the taxes are necessary for the kind of orderly government which will preserve America and its way of life. I therefore urge you to prepare your returns carefully and early… . After we receive your return, it is our duty to examine it for accuracy and completeness. … Most taxpayers are able, with the enclosed instructions, to prepare their own returns. If, however, you have questions, you may telephone or visit the nearest Internal Revenue office. An employee there will be glad to help you. Mortimer M. Caplin, 
Commissioner of Internal Revenue.
I came across this letter together with a few of the more interesting responses in a 1963 book by Lillian Doris entitled “The American Way in Taxation.” Here are a couple of the responses that struck me as worthy of note:
Dear Sir: You have presumed to tell me how I should feel about taxes. In turn, I would advise you to apply yourself to your unpleasant occupation and let the taxpayer form his own opinions. Yours, —- Inglewood, Calif. 

Dear Sir: In your personal letter to the taxpayers your quotation from Oliver Wendell Holmes is a deceitful attempt to lull the tax payer into joyfully accepting his obligation to pay confiscatory 1961 Federal Taxes. The great chief justice died in 1935 long before our Federal Government placed almost unbearable burdens of taxation upon our people. If he had lived to see the Government spend our tax money on plans to send men to the moon and other equally worthless projects he would not have liked to paid taxes either. Sincerely, —- New York, NY.

I consent to your findings and apologize for lax
In erring on my income tax
Whatever the rebate “modern style,”

I wait abated, with a smile-
To enrich the locals with my hard earned jack-
‘Cause eventually, you all will get it back. —-


Dear Mr. Director: Enclosed you will find my Income Tax Return for 1961 together with my check for the amount shown as due. You will observe that I am paying $285 taxes for this year. As a taxpayer of substance I feel that I should be in a position to make a request as to the spending of my money and hope you will concur. Will you please see that the total money which I have paid goes to a “Friendly Nation.” Kodiak, Alaska —-

Dear Commissioner, I love you, love you, love you I knew it yesterday when I received you latest letter wherein you stated that I’d been selected for a pre- refund audit. It’s like an engagement, isn’t it? True, we have only been penpals since sometime in March but I can’t deny my heart. The snows were still piled high in the roadways. The peaks were white all the way down their jagged slopes when I first went to place my dowry at your feet. After a number of your letters I still was not about to be swayed by your reconsiderations. Like any woman I was only interested in how much you could give me. You were adamant, relentless and still you pursued me and now you have won. I don’t care one iota what you can give me. You see I am in love with you. I’m yours. Take me. My days are magic and full of hope. I await the mailman with the 11 o’clock post; my nights are only a little lonely because I know someone really cares-that’s the glory of true love-my dearest. I must run now, dear one, but keep your letters coming. Let’s hope your father-what’s his name-Audit Division-approves of our plans. Love and Kisses