Statement of Dixon R. Rich, Jr., Adjunct Professor, and Faculty Member,
Low-Income Taxpayer Clinic, University of Pittsburgh School of Law, Pittsburgh, Pennsylvania

Testimony Before the Subcommittee on Oversight
of the House Committee on Ways and Means

Hearing on the Taxpayer Advocate Report and the Low-Income Taxpayer Clinic Program

July 12, 2001

Good afternoon, Mr. Chairman and Members of the Oversight Subcommittee. My name is Dixon R. Rich, Jr. I am a tax attorney in Pittsburgh, Pennsylvania, and an adjunct professor at the School of Law of the University of Pittsburgh. I have been involved as a faculty member of the Low-Income Taxpayer Clinic for the past year.

I wish to thank the Subcommittee and Congressman William Coyne in particular for this opportunity to share our perspective of and our experience with the Low-Income Taxpayer Clinic at the University of Pittsburgh. I would also like to extend the regrets of Clinic Director, Professor Martha M. Mannix, who is unable to take part in the hearing today.

We greatly appreciate the three-year funding from the Internal Revenue Service (IRS) and believe the Low-Income Taxpayer Clinic (LITC) provides a much-needed community service to individuals who have few other avenues of assistance, at the same time it is a unique and valuable professional learning experience for second and third year law students.

I would like to cover three aspects of our experience for you: first, a brief description of the Clinic at the Law School including its history, its clients, its students and its cases; second, a short review of what has gone well for us and our clients; and third, a recommendation for the future that we believe could improve what is already a highly-effective program.

The Low-Income Taxpayer Clinic at the University of Pittsburgh is one of PITT Law School’s four student clinics: tax law, health law, elder law and environmental law, that provide important legal services to the community and professional, hands-on training for future lawyers. As a result of receiving the funding award from the IRS, Professors Martha M. Mannix, Thomas D. Arbogast and Leo N. Hitt organized the Clinic during 1999, which then opened its doors to clients and students in January 2000.

Specifically, the University of Pittsburgh School of Law LITC is an "advocacy clinic." We assist low-income taxpayers with resolving open issues with the IRS. We respond to all inquiries and refer tax preparation requests to local VITA programs. PITT’s LITC is housed adjacent to the law library with the Law School’s other student clinic offices, where Ms. Stacey Patrick, our LITC administrative assistant, receives client and student messages and correspondence and maintains our client files.

The Clinic is centrally located on the main boulevard in the Oakland neighborhood of Pittsburgh and easily accessible by public transportation. The building is open during the day and evening, enabling students to meet with taxpayers without taxpayers missing work.

The LITC program provides low-income taxpayers an opportunity for free tax assistance that is confidential and independent from the Internal Revenue Service. Unlike the IRS Walk-in Taxpayer Assistance offices, our LITC is physically separate and independent from the IRS. This provides low-income taxpayers with a comfort level they cannot obtain from assistance provided by IRS employees.

Prospective clients usually ask about our connection with the IRS. Once they understand we are independent and that their conversations are confidential, clients feel more relaxed and are more inclined to fully explain their situation. By executing a Power of Attorney, low-income taxpayers are afforded representation before the IRS and the luxury of not having to personally talk and correspond with IRS employees. Clients are candid that the anxiety of talking with IRS employees creates stress that snowballs with each notice and delays them from responding to IRS notices. After contacting a LITC, an eligible taxpayer is more likely to promptly respond to IRS notices.

During the past year, we have been contacted by approximately sixty (60) taxpayers and have accepted and represented thirty-eight (38) clients. Our clients are all ages and consist of singles, single and married moms and dads, abused spouses, disabled taxpayers and retired taxpayers.

This past year we had eight (8) students during the fall 2000 semester and ten (10) during the spring 2001 semester, nine (9) women and nine (9) men. Many of the students have public accounting, general accounting or law firm clerking experience, so our clients are represented by qualified students that are assisted and closely monitored by our LITC faculty. Upon receipt of an inquiry, a specific student is assigned to contact the taxpayer and interview them to determine their eligibility. If the taxpayer is eligible, the student proceeds with the representation and prepares an engagement letter. On average, each student handles one (1) to four (4) cases/clients. Any student without an active case is assigned to specific marketing projects.

We field general questions from taxpayers. Over the past year we have handled two Tax Court cases involving a taxpayer’s eligibility for head of household filing status and the earned income credit. Both cases were settled in favor of the taxpayer by stipulation, without the need for a trial, thereby saving court time. We have responded to IRS notices requesting further proof from taxpayers filing as head of household, claiming exemptions for dependents and claiming the earned income credit. We have contacted a bank and corrected the amount of income reported on a Form 1099 when it foreclosed on a low-income taxpayer’s residence, then prepared an amended tax return reducing the discharge of indebtedness income recognized when the bank sold his house. We have filed Offers-in-Compromise on behalf of taxpayers dealing with the Collection Division of the IRS. We have assisted low-income taxpayers with formal and informal installment payment agreements with the Collection Division. We have also handled innocent spouse claims, one of which is still pending, and have reviewed the possibility of utilizing Due Process Hearings in innocent spouse and other similar hardship cases with a longtime Pittsburgh Appeals Officer, recently trained for Due Process Hearings. We have responded to an IRS Service Center Form 1099 matching audit conducted by mail on behalf of a taxpayer, who had a relative prepare her 1999 return. We correctly reported her gross income, substantiated the claimed deductions and deducted additional expenses originally overlooked. She still owes tax, but now it’s much less. In addition, we are in the process of amending her 2000 Form 1040 to deduct additional expenses, similar to those overlooked in 1999. We have also assisted a number of taxpayers with their filing status, their options for claiming withholding exemptions on Form W-4 and their option of receiving their earned income credit in advance during the year by increasing their "take-home pay."

We have placed flyers in the IRS Pittsburgh Appeals/District Counsel Office, which handles appeals and Tax Court cases, and the Taxpayer Service Walk-in Room, which handles general questions, provides tax forms and processes hand delivered payments. Additionally, students distributed flyers to elderly facilities, shelters, the Department of Welfare, churches and other social/government subsidized nonprofit organizations. All students are involved in marketing and some have obtained radio and print exposure. We arranged publicity through the local media with an interview on a local news and talk radio station and through an in-depth article, including contact information, in the Pittsburgh Post-Gazette. We have also advertised in a few neighborhood newspapers distributed free to the public in areas likely to house eligible taxpayers. This marketing experience is invaluable for students, since not introduced through the academic component of law school.

The Internal Revenue Service has also been very helpful by including LITC Stuffer Notices with IRS Appeals Division notices, as well as displaying and distributing our PITT LITC flyers in their offices. The Tax Court also includes LITC Stuffer Notices in "S" (i.e. small) cases to be held in Pittsburgh. While preparing this testimony, we received an inquiry from Malvern, Pennsylvania, clear across the state from Pittsburgh, involving a taxpayer with a mental health disability and a 1996 tax liability accruing penalties and interest. With technology today, we can represent an out-of-town taxpayer or contact a closer LITC. Telephone calls like this show the effectiveness of including LITC Stuffer Notices with IRS notices; eligible taxpayers most needy of our free services can be directly informed.

Handling LITC cases also trains students in meeting and interviewing clients. Students develop the skills of earning a client’s confidence, asking questions in a patient and unobtrusive manner, framing the issues, designing a solution or alternate solutions, then eliciting pertinent information and obtaining substantiating documentation. A few female students have also gained experience addressing and earning the confidence of older male clients.

Many low-income taxpayers do not have cancelled checks, leases and other documentation normally submitted to the IRS. Students gain the experience of utilizing alternate sources of substantiation such as affidavits. Low-income taxpayers do not always have the luxury of living in traditional family units, (i.e. one or two parents with children). Different generations of families and stepfamilies and other nontraditional living arrangements further complicate the ability to provide traditional substantiation to the IRS. The availability of our LITC services enables low-income taxpayers living in nontraditional arrangements to prove their filing status, eligibility for tax benefits and resolve controversies.

Since the time frame to completely resolve an issue with the Internal Revenue Service usually exceeds one (1) semester, students gain the experience of picking up a case midstream, that another student started. At the end of each semester when pending cases are passed to the next LITC class, they also gain the experience of preparing closing memos outlining each case’s history and law, its current procedural and administrative status and items to be completed.

Alleviating the stress associated with personally communicating with the IRS generally improves the quality of life of low-income taxpayers and their families. The low-income taxpayers benefit and the students benefit by gaining practical, clinical training. The IRS may benefit by prompt responses and more efficient communications, since students understand the IRS regulations and can accurately respond to IRS inquiries, thereby reducing the need for follow-up requests.

In closing, the University of Pittsburgh School of Law would like to thank Congress, the Committee on Ways and Means and this Subcommittee for the opportunity to provide important legal services to low-income taxpayers that were not available before the Low Income Taxpayer Clinic program was established. Our confidential and professional relationship with our LITC clients and our independence from the Internal Revenue Service distinguish our services from the free services provided by IRS employees. As you may be aware, before the LITC program, low-income taxpayers were generally limited to seeking free tax assistance from the IRS.

The Internal Revenue Service and the Tax Court have been extremely helpful in implementing this program and advising low-income taxpayers of our free services. The IRS has also been very accommodating in corresponding with students representing taxpayers. The managers of the Pittsburgh Taxpayer Service, Appeals and District Counsel Divisions have agreed to meet with our fall 2001 LITC class to explain how their respective divisions operate and make themselves available for questions.

We recommend including stuffer notices in IRS collection notices generated by the Collections Division sent to low-income taxpayers to directly inform a large group of eligible taxpayers that would benefit from our services, since other independent, confidential representation rarely exists.