Gaining a knack for tax law

March 3, 2008Duke Law News

March 4, 2008 – The Low-Income Taxpayer Clinic (LITC) offers an essential, free legal service to a group of taxpayers who would not ordinarily be able to afford representation – those considered low-income. Eligible clients include single individuals with household incomes in 2008 of up to $26,000 and couples with 2 children household income of $53,000. Students in the Low-Income Taxpayer Clinic tackle several cases a semester, learning about varying issues and levels of appeal in the IRS system. Ann Tigani ’08 participated in the clinic her 2L Spring semester and handled several interesting cases. One involved an elderly woman who had incurred a good deal of credit card debt, but worked out a payment plan with a bank and subsequently the bank forgave part of her debt.

“So much of the IRS day-to-day process is automated,” Tigani said. “So, for this client that I had, the Internal Revenue Service received an information return reporting forgiveness of debt and assessed additional tax. And in 99 percent of the cases, that is correct. But she was getting her Social Security benefits levied, which was her only source of income. As a result of the IRS levy, she was forced to accept financial assistance from her family to buy groceries and pay the rent. That’s when it’s up to us to say, ‘Look, you automatically flagged this person, but here are the other circumstances going on in her life making it inefficient for you to try to collect.’”

Tigani remembered talking to the IRS appeals officer on the phone and telling him “that [amount of money] may not seem like a lot to you or me, but this person was living on it. And to go from being self-sufficient to asking your family to support you in your very basic needs is really significant.”

The appeals officer agreed with the argument and lifted the levy on the client’s Social Security benefits. “That was when I realized that you take the tax class and you learn how the IRS assesses tax, but until you get into the clinic, you don’t realize what goes on from day to day,” Tigani said. “That’s where Professor Weinberg was fantastic. He knew what their processes were, what their staffing structure was, and he was also really helpful in bypassing the typical path that someone dealing with an IRS issue goes through.”

Daniel Foster ’08 credits the opportunities for litigation as one of the many reasons he chose the LITC. “There is a multi-level process," Foster said. "With the IRS, first you can talk to the examining agent and, if the case can not be resolved, you request an appeals conference, and the case becomes a vehicle for negotiation. The next level is seeking resolution with the IRS attorney who will try the case — another opportunity to resolve the case without litigation. Finally if the case is not resolved, the case will be tried before a United States Tax Court. You definitely get a lot of shots to make your case.”

One of Foster’s cases is that of an ‘innocent spouse’ — a divorced woman who filed jointly. The woman, a part-time hairdresser, claims to not have been involved in any of the financial affairs when she was married, and does not have the ability to pay the back taxes. In addition, the IRS off set her individual income tax refunds from two subsequent years when she filed individually.

“There is a provision that allows the ‘innocent spouse’ to be relieved of that burden, to put it all on the spouse who earned the income and benefited from it. So she has filed for that,” Foster said. There are three different ways to receive relief under this status, two of which have a statute which required a request for relief to be filed within 2 years. The third way had no defined time limit. Before the IRS conceded the case, we planned to request the Court to find that the two year limit did not apply and if the Court held against us, to appeal to the case to the Fourth Circuit.”

Foster, who is headed to Simpson Thacher & Bartlett in Washington, D.C. to work in taxation law after graduation, said the most beneficial part of the clinic was learning to read the codes and regulations. “Everyone says you have to have a knack for tax - I thought this would be a good chance to see if I had it,” he said.