ACTION

Monday, December 1, 1986

Taxpayer wages 11-year feud with IRS

By Joe Brogan, Palm Beach Post Staff Writer

Joseph W. Smith Jr. is convinced he’ll never have any peace as long as he’s a taxpayer and the Internal Revenue Service exists.

He’s driven by an 11-year feud with the IRS over what turned out to be erroneous assessments on his 1973 and 1974 federal income tax returns. The problems started in 1975 when his return was audited.

The IRS twice collected the money, twice returned it with interest after Smith filed suit, and then again tried to collect the money this month—despite a federal court order that said Smith didn’t owe the IRS anything.

Holger Euringer, IRS public relations officer in Jacksonville, said last week that the agency had been wrong all along and that Smith soon would receive a letter of apology from the IRS district director.

“We did make numerous mistakes in the collection procedures,” Euringer said. “We’re very sorry and we apologize. We did not intend in any way to harass or intimidate him, but I can see why he might have that impression.”

The 61-year-old Smith said his long ordeal has made him bitter.

“I don’t believe it was unintentional,” he said. “If ever there has been a case of deprivation of rights, a violation of the due process clause, this is true in my case. The federal government is a lawless renegade.”

Smith, who operates a videotaping business from his home at 2009 S. Olive Ave., has asked for court orders since 1975 against what he termed, “an out-and-out government fraud.”

While generating a snowstorm of legal documents, the outspoken Texas native has battled one of the government’s most powerful agencies largely without help from attorneys.

Court documents, IRS letters and Smith’s files tell a chilling story of IRS bumbling that began in 1975 when the agency disagreed with Smith on how much he owed on 1973 and 1974 taxes.

After the audit, the IRS said Smith owed $1,468 in back taxes in addition to what he had paid. Smith disagreed, so the IRS took out the money he was owed in rebates as a result of business losses in other years.

Smith filed suit, but the government kept the money until just before his 1978 hearing in U.S. Tax Court, when IRS officials admitted the assessment was inaccurate, according to court records.

The IRS said the error was caused by confusion over what Smith and his ex-wife individually owed in 1974, the year they were divorced.  The court ruled that he owed only $640 for 1974, and the rest of the assessment was refunded to him. The court also said Smith had been overcharged $300 in 1973, and ordered a refund.

During the three years it took to get his suit settled, Smith said the IRS held $5,000 it owed him because of business-related operating loss rebates. He said the IRS first applied part of that money to the erroneous assessment. He said he later was paid the full amount of the rebates.

Euringer said the IRS is not allowed to withhold refunds pending the outcome of court cases unless the total amount is applied to taxes owed.“If what he’s saying is correct, we were wrong,” he said.

Then in 1980, the IRS took a second look at Smith’s 1973 and 1974 tax returns and said he owed $2,556 plus interest.  The IRS took that money out of proceeds from the sale of a condominium in Portland, Ore.

Smith said he told the IRS about the previous tax court decision and said he didn’t owe the money. The IRS stuck by its decision, and he filed a refund claim for the $2,556, which he said the IRS failed to answer.

Euringer, however, said the IRS rejected the claim, which allowed Smith to take the matter to court.

In 1983, Smith filed suit in U. S. District Court in West Palm Beach to get the money back.

But before the case could go to trial, according to documents from the tax division of the U.S. Justice Department, the division declared the $2,556 assessment a wrongful levy.

Kayla Lettow, a tax auditor with the examination section of the agency’s Problems Resolution Office, said last week that the assessment was dropped because Oregon IRS revenue officer W. J. Manderfeld incorrectly analyzed Smith’s tax liability.

So on Nov. 28, 1984, Smith signed an agreement with Justice in which he dropped the suit in exchange for a refund of the $2,556, plus $1,675 in interest.

Smith said he waited for months, however, and no check came. So he reopened his suit. On March 11, 1985, U.S. District Court Judge James C. Paine ordered the IRS to pay up in 30 days.

Smith received a check for $4,231 on April 12, 1985, five months after the deal was made and just one day before the government would have been in contempt of Paine’s order.

After that, he said, he put the matter out of his mind and figured the final chapter had been written.

But on Oct. 23, 1986, he said, an IRS revenue agent came to his door demanding that he pay $3,130 in assessments, interest and penalties owed on his 1974 taxes. He said the agent told him the IRS mistakenly had refunded the money.

“I couldn’t believe it,” Smith said. “I told her I didn’t owe it and that I had a court order to prove it. She said she didn’t know anything about that but I should give her a check, and now. I told her to tell the IRS to try to get the money and slammed the door in her face. The agent turned on her heel and muttered that would no problem of the IRS.”

Action wasn’t long in coming. On Nov. 5, the IRS issued a notice to Barnett Bank of Palm Beach saying it  wanted the $960 in Smith’s bank account because he owed $96l.70 on his 1974 return.

Euringer said the Nov. 5 bank account levy was a mistake.

Nixon Was A Fascist

I owned and operated a successful lumber business. Nixon put in place price controls that favored America’s largest lumber producers and penalized independents—my suppliers. He put hundreds of independent lumber mills out of business.  Stagflation, government’s means of taxing us through inflation, put me out of business.

My wife divorced me and legally grabbed all of our property, leaving me with nothing. The IRS cooperated with her to illegally tax me. A conspiracy left me struggling to exist. I was locked out for non-payment of rent.  I was called an illegal tax protester.