02/15/00- Updated 10:10 AM ET


IRS announces less intimidating approach
By Thomas A. Fogarty, USA TODAY

WASHINGTON - The Internal Revenue Service will announce a less intimidating approach Tuesday to notifying millions of taxpayers when it intends to seek financial information from their friends or associates.

The IRS will abandon the notice it has been using when it might make outside contacts in pursuit of financial information about a taxpayer.

The notice, which was initiated in January 1999 in response to IRS reform legislation, warns that the government "may need to contact third parties, (including) neighbors, employers, employees and banks."

IRS Commissioner Charles Rossotti said 15 new notices targeted to specific situations "gets clearly worded information out to taxpayers without needlessly alarming them."

The original notice was barely in the mail last year when the IRS was hit by a public reaction characterized by Rossotti as "strong and negative."

Under the old process, the IRS planned to send letters to about 25 million taxpayers. Under the new plan, about 8 million taxpayers could be affected, the IRS estimated.

Among other changes, the new notices spell out the IRS policy of first dealing directly with the taxpayer - not third parties - whenever possible. One of the new notices includes a blank space for the specific information the IRS is seeking.

The IRS hopes that the action will end criticism that the original notice did more harm than good.

"They were scaring the dickens out of my clients," said E. Martin Davidoff, a lawyer and accountant in Dayton, N.J.

Davidoff, who has been tracking the issue for the American Association of Attorney-Certified Public Accountants, said the new notices still fall short of true reform.

New notices will still leave taxpayers clueless about the timing of possible third-party contacts by the IRS, he said, and IRS notices will continue to go out when a third-party contact is less than certain.

Davidoff said Congress should rewrite the law.

"We're pleased some changes are moving forward," said Craig Orfield, a spokesman for Sen. Christopher Bond, R-Mo., an opponent of the original implementation. "What's not clear yet is how they'll be received by the public."


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