Mortimer Caplin, who served as commissioner of the Internal Revenue Service in the Kennedy administration and the early months of the Johnson administration, sees problems ahead for taxpayers and practitioners from the government shutdown.
The IRS announced plans for cutting back all but essential functions during the shutdown, including stopping tax refunds and closing the Tax Court, but will still require the payment of taxes (see IRS Suspends Tax Refunds and Tax Court Operations). “The law is still in effect, and businesses and individuals should still continue to file their tax returns and make deposits,” Caplin pointed out. “For those engaged in tax litigation or coming into compliance with IRS regulations, they will have more time to prepare as the IRS and the U.S. Tax Court have suspended operations.”
Caplin co-founded the Washington and New York-based law firm Caplin & Drysdale after leaving the IRS in 1964, having landed on the cover of Time magazine for all the improvements he brought to tax administration during his tenure at the agency. As a longtime practitioner, he wants to warn his fellow practitioners about the legal procedures they and their clients will be facing during the temporary government shutdown. “So far as the IRS or the tax law is concerned, they must live by the statute,” he pointed out. “For example, if they want to go into the Tax Court, the statute requires that a petition be filed within 90 days from the date that the liability is posted, with the post office stamp on it. That rule is still in effect. The statute, Section 6213(a), actually says the petitioner must file a petition with the Tax Court to redetermine a deficiency, so they have 90 days after the mailing of the notice of deficiency. Nothing can be done until then by the court.”
Caplin also has advice about dealing with tax liens and levies. “The taxpayer has the right to get a hearing on a proposed lien or levy, but they must file within 30 days of the time of the mailing of a notice of determination,” he said in an interview Friday. “Hand delivery to the courthouse is not available, so you really have to mail it and have a stamp by the post office on your petition that you file with the court. That’s important so far as someone who is facing liens or levies.”
Even though taxpayers may receive automated notices from the IRS computer systems during the period of the shutdown and won’t be able to reach anybody at the IRS to help them, they still need to make sure their responses and claims for tax refunds arrive at the IRS in time.
“You have to file your claim for refund, but you can’t get a refund,” said Caplin. “But you want to protect yourself and file within the statutory rules.”
The government shutdown is only putting more pressure on the IRS during a period of turmoil for the agency. “The IRS is in the midst of a very difficult period right now and morale is very low,” said Caplin. “This is not going to help operations and not help morale.”
The pressure comes at a time when the IRS has also been given a large share of the work in implementing the Affordable Care Act. “They have heavily increased responsibility on Obamacare, and that is right in the midst of things right now,” said Caplin. “Getting prepared for their administrative duties under Obamacare is now mixed up with this big suspension.”
Caplin’s tenure as commissioner at the IRS was relatively peaceful and he was credited with building the agency’s image and a nationwide computerized tax master system. He is used to being embattled in a much different way than the current leaders of the IRS facing their tribulations in Congress. A World War II veteran, he served as a U.S. Navy beachmaster during the invasion of Normandy on D-Day, and was part of the initial landing force on Omaha Beach, later receiving the French Legion of Honor.
Asked what he thinks of recent events at the agency, and the string of high-level departures, he responded, “Life has really changed over there. I came in with President Kennedy on day 1. I was actually on board on February 7 after the president was inaugurated on January 20. I cleared the Senate, had my hearings, and there I was on the job on February 7. President Kennedy later came over to the IRS, the only president in the history of the country that ever came into the IRS building, so we had great morale there and felt we were recognized and respected. And today they’re under this siege with all the hearings that they’ve had.”
He is hoping that the nominee for the next IRS commissioner, John Koskinen, a former chairman of Freddie Mac, will be able to turn around the embattled agency once he is confirmed by the Senate. “I happen to know John and he’s an extremely able fellow,” said Caplin. “He’s held wonderful jobs in government, both on the federal level and in the District of Columbia, and he performed in an outstanding manner. Let’s get him on board. That’s the important thing.”
“I think having a fresh commissioner in there is important right now, somebody who is respected,” he added. “He’s not a tax person, which changes the rules. At one time, we had tax lawyers who headed the IRS. But then, after the 1998 restructuring law, they wanted administrators in there. That’s sort of questionable. That whole reorganization ought to be re-examined.”
However, he does not expect things to get much easier for the current IRS officials. “They’ve had a very tough time because people on the Hill are getting out all of their anger,” said Caplin. “There’s a feeling of general opposition to the IRS. And it’s so essential to the government to have a strong tax law and a strong and fair enforcement capability. It is a very difficult budget situation, with severe cutbacks and at the same time expansion of their responsibilities.”
Besides the government shutdown, Caplin also sees danger from the threat to not raise the debt limit. “It’s hard to conceive that we wouldn’t be able to afford to pay our debts,” he said. “The interest rates on our bonds will go up, and the general sentiment about the standing of the United States government in the eyes of the world will be damaged very badly. It isn’t only the cost to the government of the extra interest rates and things of that sort, but the general sense of respect of the United States. I think Congress should act quickly.”