You can’t fight City Hall. Let alone Uncle Sam.
That’s what everyone told local business owner Arlene Howard after she was repeatedly dissed by a local IRS agent. Don’t fight it. If you engage in fisticuffs with the IRS, they told her, it’ll be expensive and time consuming and you’ll never win. Of course, they were right. But Howard is one feisty 71-year-old, and her instinct was to do battle. And that’s precisely what she did.
Surprisingly, she’s racked up a string of early victories. At least for now, she appears to have the IRS on the ropes. Her biggest victory so far came last week. But we’ll return to that in a minute; let’s start at the beginning.
Howard owns a Santa Monica public relations firm, and her husband has a different business. Like so many small operators, their revenues swooned in the Great Recession. Rather than lay off people, she chose to keep her 10 employees working at the same time she propped up her husband’s business. But to do that, she had to temporarily use money she normally would have sent to the IRS to pay her payroll taxes.
She knew that would trigger penalties and interest, and she’d have to pay the back taxes, of course, but she was confident she could make it all good later. She promptly notified the IRS and entered a repayment plan. Earlier this year, she finished paying up.
But while that was going on, Howard had to contend with what she calls a vindictive IRS agent. For example, she said the agent demanded Howard bring her CPA – no small expense – to attend a meeting at a local IRS office; the agent wasn’t there. Howard claims the agent misapplied Howard’s payments in such a way that caused her to rack up more penalties. The agent refused to reverse the penalties, but did send a string of threatening letters. One time, Howard’s bookkeeper told the agent that her harsh actions could put people out of work, but the agent reportedly said, “I don’t care.”
Howard stewed about it over the summer. She read five books about the country’s founders and the Constitution. Something about the indignity of taxation without representation stuck with her. Her situation was different, of course, but she felt that same brand of resentment, the sting that comes from feeling powerless while some authority takes your money and beats you up. She understood a bit more clearly why people back then were willing to fight and die in an uprising sparked by abusive taxation.
Rebellion grew in her heart. She said pretty much everyone – “lawyer, CPA, husband” – wisely counseled her to take a chill pill. “But eventually, you’ve got to listen to your inner voice,” she said.
She wrote an op-ed, published in the Sept. 5 issue of the Business Journal, that outlined her gripes and called for the creation of an office that would be an advocate for small-business owners in disputes with the IRS, much like the ombudsman for individual taxpayers. She wrote letters to elected representatives.
Sen. Barbara Boxer on Sept. 22 sent a letter to an IRS official asking his “review and consideration” of Howard’s issue. Rep. Howard “Buck” McKeon asked his colleague, Rep. Henry Waxman, to investigate. Sen. Dianne Feinstein wrote a letter to Howard saying she “will be glad to do all I can to be of help.”
Howard even received a letter from President Obama. It was a bit of a form letter – he thanked her for “sharing your story with me” – but even a simple acknowledgment from the White House was a victory.
Finally, last week, she was notified that the regional director of the IRS – whom she calls cooperative and decent – is recommending that Howard be refunded about $15,000 in the extra penalties and costs that the vindictive agent cost her.
So for now at least, it appears Howard’s one-woman tax rebellion is working.
Last week, while thinking back, she said, “those books really inspired me.” She paused. “Plus, I was just really pissed.”
Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].
