While the stress of tax season will end for most people on April 15, students in the Tax Clinic at Washington and Lee School of Law will be gearing up to deal with taxpayer mistakes and other issues related to the filing deadline.
Launched in 2008, the W&L Tax Clinic represents low income individuals who have a tax controversy or some related dispute with the Internal Revenue Service (IRS) or the Virginia Department of Taxation. The Clinic is not involved in routine tax preparation, but the law students do help with one of the most dreaded outcomes of tax filing—the audit.
Many audits are triggered automatically by IRS software when people file in March and April. Tax Clinic director Michelle Drumbl says the worst thing a taxpayer can do is to ignore the examination notice from the IRS, or simply pay the proposed amount without question.
"People are, perhaps understandably, terrified by audits," says Drumbl. "Most of the audit process is conducted through letters and the procedures involved are confusing at best. We can help taxpayers understand why the IRS thinks something has been misreported and guide them through the steps to substantiate or correct the problem, hopefully in the taxpayer's favor."
Drumbl speaks from experience. She once received a notice when the IRS thought she had made a math error on her return. Not surprisingly, the IRS was wrong about the error, but even Drumbl, a tax professor and former staff attorney for the IRS, concedes that receiving the letter made her nervous.
"What people need to know is the IRS is actually very reasonable when it comes to resolving these issues, especially when you deal with them quickly and honestly," adds Drumbl. "And when these negotiations fail for some reason, we may be able to challenge the outcome in the U.S. Tax Court, which is another option of which most taxpayers are unaware."
The Tax Clinic serves the entire state of Virginia and generally helps anyone whose income does not exceed 250% of Federal Poverty Guidelines. For example, a family of four making less than $57,625 per year is eligible to use the Tax Clinic's services.
The students in the Clinic also help with a broad array of collections issues, providing relief for taxpayers facing a forcible seizure of assets, such as having their paycheck levied or funds drawn directly from their bank account. This can happen when a person has not filed a return in a number of years and the IRS creates a substitute return. After notification attempts fail, the IRS will apply a levy to satisfy the tax debt.
Shane Vandenberg, who works in the Tax Clinic, says the first step in such cases is to determine whether the taxpayer even owes the stated amount, which they often do not.
"The IRS makes certain assumptions about a person's income without taking into account deductions or other issues," says Vandenberg, a third-year law student from Charlottesville. "With documentation from the taxpayer, we can reconstruct returns to show that the taxpayer owes less, or in some cases is even owed a refund."
And in situations where taxpayers do owe the IRS back taxes, the Clinic can help them reach an agreement with the IRS that stops or reduces the levy and sets up a schedule to repay the tax debt. This allows the taxpayer to function in society without falling further into poverty.
"For someone struggling financially, a levy sends everything off the rails and makes recovery impossible," adds Vandenberg. "This is not in the interest of the IRS because then the tax debt might not ever be paid."
The Tax Clinic, which provides services free of charge, is funded in part by an annual grant administered by the Taxpayer Advocate's Low-Income Taxpayer Clinic program (LITC), a program that addresses the increasing complexity of the tax code and its effect on underrepresented populations. While tax debts can be burdensome, the cost to pay a lawyer to help can often far exceed the actual IRS penalty.
This is opportune for W&L Law since a key component of its innovative third-year curriculum is the requirement that all students have actual practice experience and client interaction before they can graduate. For Vandenberg, the experience has been eye-opening.
"It's amazing how many people live right on that edge," he says. "They may be very compliant taxpayers and all of the sudden life gets in the way. The IRS can be very understanding about these issues, but sometimes they are not. It helps to have us there to navigate the system."