Maryland couple defeats IRS in Supreme Court

November 03, 1992|By Lyle Denniston | Lyle Denniston,Washington Bureau

WASHINGTON -- A husband-and-wife team with a modest legal practice in Prince George's County handled their own case and beat the federal tax collector yesterday -- in the highest court in the land.

With silent support from the Supreme Court, Clayton J. Powell Jr. and Darlene Wright Powell of Mitchellville need only go to the U.S. Tax Court to seal their victory. The Supreme Court turned down flat an appeal by the Internal Revenue Service. As is usual with that kind of action, the justices did not explain.

Only one justice, Byron R. White, voted to consider the IRS' appeal, and that was not enough. It takes four votes to grant a review by the court. Mr. White did not say why he thought the case should be heard.

All that is necessary now, Mr. Powell said in an interview after the court had acted, is for the case to go back to the Tax Court -- probably to be dismissed.

The Powells, whose law office is in Greenbelt, have been defending themselves from a $6,500 claim by the IRS for nearly four years. It involves their tax return from eight years ago. "I couldn't afford to hire a lawyer to take the case for me, at $300 an hour," Mr. Powell said in a telephone interview. "We're not very fancy people."

They thought they had settled everything six years ago, he said, when they paid $472.69 to satisfy an IRS demand after an audit of their 1984 tax return. But, in a maneuver that the Powells did not hear about until early in 1989, the IRS had come after them again in 1988, demanding $6,500 more in taxes for 1984.

The Powells never received that notice; they had moved from Adelphi to Mitchellville. The IRS conceded that its computer did not keep up with them and the taxes-due notice went to the Powells' old Adelphi address. The post office, which also has conceded that it was confused, sent that notice back to IRS without delivering it.

When the IRS' address-keeping system did catch up, it notified the Powells that it was going to seize their property if they did not pay a claim that had reached nearly $10,000 with penalties and interest. The Powells went to the Tax Court to pursue a challenge, claiming their 1986 payment was the compromise that settled the dispute.

But the Tax Court said that they had come there too late and that the IRS had done all it could to try to reach them earlier.

Last March, however, the 4th U.S. Circuit Court of Appeals in Richmond, Va., said the IRS had been too late in pursuing the taxes due. The IRS, the Circuit Court said, had not been diligent enough in monitoring Powells' whereabouts. The IRS took the issue on to the Supreme Court, saying that the lower court's decision would interfere seriously with its ability to collect taxes from the vast number of taxpayers who change addresses.

Mr. Powell expressed relief when the court turned down that plea. "This is certainly the death knell of this case," he said, lamenting the cost to him and his wife, and to the federal government.

"In lost time on this, I am out easily $100,000. The government has spent a million dollars prosecuting us."

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