Where is the Illinois Department of Revenue Taxpayer Ombudsman hiding? Our letter to Illinois Governor Bruce Rauner

Bruce Rauner, Governor

Office of the Governor

207 State House

Springfield, IL 62706

Dear Governor Rauner,

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.”

As a Springfield based accountant for very small business I can tell you that things have gone from bad to worse at the Department.

Here are four examples:

A few weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?  He died two years ago.  The Department is aware of the death. We attached a death certificate to a previous notice. Why didn’t the Department file a claim against the taxpayer’s estate?  Why didn’t someone associate the dead taxpayer to the accountant forwarded to the attorney for collection.

A client who was a victim of identity fraud, whose social security number was used to obtain a sales tax number in the 1980’s, had her refund of $544.00 applied to a 1989 sales tax liability that she doesn’t owe, never incurred and is not liable for. Ironically the notice issued by the Department directing the client to call the “phone number below for the location your overpayment was applied”…..has no telephone number.  By the way when we contacted the Department, the obviously burdened and frustrated employee, recommended that the only way to clear up the matter was to have our State Representative intervene.  Otherwise it would take at least four to six months to review our inquiry.

A client made a mistake in reporting his payroll tax wages and liabilities.  Our office prepared the necessary amended payroll forms and filed them with both the Internal Revenue Service and the Illinois Department of Revenue.  No problems with the Internal Revenue Service.  The returns were accepted as filed. Not so with the Illinois Department of Revenue.  The Department rejected our amended returns based on our failure to include corrected W-2 forms.  Of course we did include the forms.  No explanation of what happened to them after they reached the Department for processing.

A single parent of two children just had his bank account levied by the Illinois Department of Revenue in the amount of $200.00 to meet his past due liability. I can understand that the state is knee deep in serious financial difficulties, and should collect every dollar owed. But $200.00 is not going to make much of a difference in things in the long run.  I can assure you that the $200.00 makes all the difference to this struggling taxpayer.  Common sense should prevail in all enforced collection issues.  It appears that the chase for tax dollars is clouding the Department’s judgement. Oh and this just in.  I spoke with a client this morning who told me that the Illinois Department of Revenue has levied his bank account for $38.00.  In this case the taxpayer does not owe the State any money.  We are bogged down with the inability of the Department to process any type of amended return or claim for refund efficiently and accurately.   

We can do better.

I read with interest your “Cutting the Red Tape” initiative. Good start on what may be Mission Impossible in the State of Illinois.  Still solutions to the day to day problems such the ones I listed above,  should not be the sole responsibility of our State Representative to solve. No one is acting as an ombudsmen at the Illinois Department of Revenue to help taxpayers such as the Taxpayer Advocate Service does with the Internal Revenue Service.

Ironically the Department regulations make reference to a “Taxpayer Ombudsman.”  I have quoted below from Title 86, Section 205.20 Illinois Department of Revenue Regulations.

Department Responsibilities

The Department of Revenue shall have the following powers and duties to protect the rights of

Taxpayers:

1. To furnish each taxpayer with a written statement of rights whenever such taxpayer

receives a protestable notice, a bill, a claim denial or reduction regarding any tax. Such

statement shall explain the rights of such person and the obligations of the Department

during the audit, appeals, refund and collections processes. All such written taxpayer

contact shall include the phone number of the Taxpayer Ombudsman.

(Section 4 of the Act).

Restoring the office of “Taxpayer Ombudsman” is a good start.  

Thank you for your prompt response.

Donald C. Fuener E.A.

President

Cc:  Sara Wojcicki Jimenez

A Short History of Tax Cuts and We Have Enough of the Illinois Department of Revenue. Exerpts From Our May 1, 2017 Newsletter

“You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.” – Ronald Reagan

Tax cuts are in the news again.  Back in 1981, when I was just a young tax geek, then president Ronald Reagan, presided over the biggest tax cut in U.S. history -- equivalent to 2.9 percent of GDP -- when he cut the top individual tax rate from 70 percent to 50 percent in 1981, right after taking office. In 1981 the economy was just a mess. Stagnant I think is the term. Much like today. However back then the inflation rate was 13.55% and a 30 year fixed mortgage would cost you 15.45%. Just imagine qualifying for a mortgage back then. I couldn’t.  The light at the end of the tunnel was a train coming this way.

Reagan soon discovered that revenue needed to be increased.  More than half of the bill's changes, including faster write-offs for businesses and a credit on investments, were subsequently undone.  According to CBS news “the most durable effect of the 1981 cuts was to lay the groundwork for a tax reform in 1986, which was intended not to raise revenue but to clean up the tax code. In the century-old history of the income tax, the 1986 effort gets high marks from left and right alike as the only substantial effort to streamline the tax code.

"That was the last remotely aggressive effort to pare back loopholes," said Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy. "Since then we've had a gradual but continual increase in the number of loopholes."

As part of the deal, capital gains, which for most of U.S. history have been taxed at relatively low rates, were treated as ordinary income; the number of tax brackets was reduced; many tax shelters were eliminated and tax rates overall were cut.

How did the 1986 cut affect the economy? GDP did pick up over the next two years, before slamming into a wall during the 1990-91 recession. Bill Clinton would go on to raise taxes to close the growing deficit. Some economists blame the tax cut for contributing to the late-80s real estate crash, and the recession, by making it less attractive to invest in real estate. (Donald Trump made the same charge in 1991). Others say there's no connection.”

The 12 bullet point memo released last week proposes a 15% business tax rate.  I assume that would cover us small business owners, as well as, very large businesses. This is a very good thing.  The Financial Samurai writes “For anybody who has ever made money, you know that paying tax on your income is one of your largest ongoing lifetime expenses. A progressive tax system that taxed my income at a Federal + State marginal rate of over 50% during the Obama years was one of the catalysts for negotiating my severance and leaving the workforce for good in 2012. It didn’t feel worthwhile anymore to work 60-70 hours a week and go through so much stress for the privilege of paying the government more than I kept.

What’s even more amazing is that the vast majority of Americans save LESS than their effective tax rate! Can you imagine being taxed at a 20% effective rate when you can only save 6% of your after tax income? No wonder why so many people can’t escape the Matrix.”

Two final points from the Cato Institute to consider:

1. In a free country, money belongs to the people who earn it. The most fundamental reason to cut taxes is an understanding that wealth doesn’t just happen, it has to be produced. And those who produce it have a right to keep it. We may agree to give up a portion of the wealth we create in order to pay for such public goods as national defense and a system of justice. But we don’t give the government an unlimited claim on our money to use as it sees fit.

2. Private individuals and businesses use money more efficiently than governments do. People with their own money at risk spend or invest it carefully. You don’t find many $600 hammers or insolvent retirement programs in the private sector. Money will do more good for more people in private hands than in government hands.

Two weeks ago a client stopped by our office just in tears.  Her deceased husband’s business had been turned over to an attorney for collection of a past due balance tax account by the Illinois Department of Revenue.  Does she have to pay the bill?

In 2014 CEO.net ranked Illinois as one of the three worst states to do business in.  Here is one comment from CEO.net, “Illinois is rated in the worst category; their taxing scheme is deleterious (harmful) toward small business.The Illinois Dept of Revenue seems most adversarial with respect to small business support and promotion.

Next month we will write to you about our answer. In short no. We will explain why. And more importantly our reaction to what happened and what you can do to help us.