Is The IRS A Wuss?

Seizing on a can't miss voter-pleaser, congressional investigators two years ago put the Internal Revenue Service on trial and found it guilty. CBS News Correspondent Eric Engberg reports.

"God help the taxpayers," an IRS agent told Congress.

"Armed agents accompanied by drug sniffing dogs stormed my restaurant," said a taxpayer.

Those dark tales were all it took to pass a law called the Taxpayer Bill of Rights whose backers promised "an entire change in the way the employees and the IRS treat the taxpayers," in the words of Sen. William Roth, R-Delaware.

But now, experts say, the pendulum may have swung too far in the other direction.

"Congress has emasculated the IRS," said tax accountant Andrew Lang.

The new rules make it easy for taxpayers to demand formal investigations of tax agents, leaving agents on the street feeling paralyzed. Add budget cuts, and experts say it's a field day for chiselers.

"Tax collectors are in the business to collect as much money as they can," said Lang. "I don't think that is happening any more. No one thinks it's happening any more."

Two years ago, IRS had 5,500 tax agents on the street. Today there are 4,400 - a 20 percent drop.

In 1997, the backlog of delinquent tax cases was 2.1 million. It's 3.1 million now, up 47 per cent, and one of the IRS's most effective tools - seizing the private home of someone who won't pay - hasn't been used in more than a year.

A former client of Iowa accountant Rick Oelerich figured that out and tried to keep a huge tax debt out reach of the "friendlier" IRS by putting the money into a mansion.

"It became evident to me that the individual had essentially used his unpaid income tax dollars to finance the construction of what I consider a very lavish home," Oelerich said.

IRS Commissioner Charles Rossotti says the collection problems are only temporary while the agency implements the new Congressional rules.

"It may take us a little longer under this new procedure, but eventually if somebody owes the tax, they are going to have to pay it," Rossotti said.

The best sign of how serious the problem has become is a dollar sign. Delinquent taxpayers owe $40 billion, a 20 percent increase since Congress spanked the IRS.

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