Cal Poly LITC 5 Year Report

LOW INCOME TAXPAYER CLINIC FIVE-YEAR REPORT

2010–2014

Then and Now. Celebrating the success, growth and accomplishments of the Cal Poly LITC.

LOW INCOME TAXPAYER CLINIC

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OUR MOTTOThe Cal Poly Low Income Taxpayer Clinic (LITC) positively affects the lives of its clients and students every day. The LITC provides students with opportunities to develop their professional skills and expand their practical, hands-on learning experiences in the best tradition of Learn by Doing.

OUR MISSION STATEMENTLow Income Taxpayer Clinics ensure the fairness and integrity of the tax system by educating low-income taxpayers about their rights and responsibilities, providing pro bono representation to taxpayers in tax disputes with the Internal Revenue Service, conducting outreach and education to taxpayers who speak English as a second language, and identifying and advocating for issues that impact low- income taxpayers.

LITC student Brynne Gerardi, speaking at Cal Poly’s Parents & Family Weekend, October 2014

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A MESSAGE FROM OUR EXECUTIVE DIRECTOR AND FOUNDER

LISA SPEROW, J.D., Executive DirectorLisa has been teaching at Cal Poly since 2001 and has served as the director of the LITC since 2012. Prior to joining Cal Poly, Lisa served as a trial attorney for the United States Department of Justice. She has been practicing law for almost 20 years and is active in the community.

EDDY QUIJANO, J.D., Clinic FounderEddy founded the Cal Poly LITC in 2010 and now serves as a member of its pro bono panel. Eddy began his legal career in 1971 as a trial attorney with the Office of Chief Counsel of the Internal Revenue Service in Los Angeles and New Orleans. Thereafter, he entered the private practice of law specializing in federal and state taxation and business matters until his retirement from his firm. Eddy joined the faculty of the Orfalea College of Business in 2003 and served in various positions, including associate professor, chair of the Accounting area, director of the master’s in accounting program, and lecturer in taxation and law.

“When I became executive director of the LITC, I was immediately impressed by the dedication and responsibility the students showed toward their cases and clients. The fact that their efforts will not just be graded but will also have a very real effect on an individual in a difficult situation causes them to dig deeper, try harder and stand taller.”

“When the Cal Poly LITC began five years ago staffed with only one student accountant, no one could foresee its remarkable life-changing benefits to its clients and their families, or the outstanding resource it would become for Cal Poly students. Today, teams of student accountants provide tax controversy advice and advocacy as well as tax education and counseling for low-income taxpayers through the daily application of Cal Poly’s Learn by Doing educational and experiential leadership philosophy.”

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BY THE NUMBERS

$1,188,513 CLIENT LIABILITIES REDUCED

219 CASES ACCEPTED

164

STUDENT ACCOUNTANTS

22 CASES FILED IN U.S. TAX COURT

2,881 COMMUNITY MEMBERS SERVED

Over the past five years, the Cal Poly LITC has experienced exceptional growth in its client base, outreach efforts, and the number of completed senior projects. Since 2010 approximately 160 Orfalea College of Business students have assisted 219 LITC clients in reducing their total tax liabilities by more than $1,188,500. Students also assisted the LITC attorneys in 22 client cases handled in the U.S. Tax Court. Today, the Cal Poly LITC remains the only non-law school low-income taxpayer clinic in the country assisting unrepresented litigants as part of the U.S. Tax Court's Calendar Call Program.

LITC students have helped clients in a broad range of tax matters, including a client’s inability to pay delinquent tax liabilities due to bankruptcy, disability or financial or medical hardship. Typical clients have issues with identity theft, home foreclosures, or unfiled tax returns. Students also assist with declaring innocent spouse status and substantiation of deductions or expenses. The LITC typically provides these services in connection with proceedings before the U.S. Tax Court or the IRS Appeals Office, or by responding, communicating or negotiating with representatives of the examination and collection divisions of the IRS or California Franchise Tax Board.

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Since its establishment, the goals of the LITC have centered on helping our clients successfully resolve their cases. Whether it has been a simple solution or a complicated long-term issue, we strive to build a personal relationship with every client.

The daily work of Cal Poly LITC student advocates usually involves analyzing client records and IRS communications, researching applicable federal tax authorities, substantiating and scheduling expenses or deductions, or interviewing and preparing client and witness statements. Each of our clients has a unique success story. Here are just a few.

IRS Agrees to Income Exclusion from Home Foreclosure The LITC’s first case before the U.S. Tax Court involved a creditor’s foreclosure of a divorced grandmother’s home and cancellation of the mortgage balance due on the home. The IRS determined the foreclosure constituted taxable income and sought approximately $25,000 in tax, penalties and interest from the client. The LITC, however, convinced the IRS that the Internal Revenue Code excluded the cancelled home mortgage debt from the client’s income, thereby eliminating the proposed tax deficiency, penalties and interest. Students also successfully convinced the IRS that the client was entitled to a refund of $800 based on a previously unclaimed tax credit.

Successful Resolution of Identity Theft The LITC represented a migrant farm worker who neither spoke nor read English. The case involved an IRS determination that the client understated his earnings for two tax years, resulting in additional tax liabilities, penalties and interest exceeding $30,000. The facts indicated that the client had filed his tax returns in a timely manner and correctly reported his earnings. The client was unaware, however, that five other individuals improperly used the client’s social security number to receive and report their earnings. LITC student accountants used payroll records of the client’s employer to identify errors and discrepancies on certain W-2 forms and convinced the IRS that the client was the victim of identity theft. The IRS conceded the entire tax claim against the client.

IRS Accepts $20 Offer in CompromiseA woman financially dependent on Social Security—and who had recently undergone several surgical procedures —engaged the LITC to stop an IRS levy of her monthly Social Security payments in connection with an unpaid federal tax liability of $118,000. Considering the client’s limited income, her health condition, and the continuing IRS levy of her Social Security payments, the LITC promptly submitted an “Offer in Compromise” with supporting documentation to the IRS on the client’s behalf. The IRS, recognizing the financial and medical hardship the client faced and the additional burden the IRS imposed with the levy on her primary means of financial support, accepted the client’s offer of $20 in full and final settlement of her outstanding federal tax liabilities.

CLIENT SUCCESS STORIES

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Collection Due Process Equivalent Hearing Results in Tax Refund During the client’s first visit to the LITC, student accountants analyzed a box full of unopened letters the IRS had sent the client during the previous nine months. LITC students learned that the IRS had filed a continuing levy on the client’s monthly Social Security payments—his sole source of income—because the client failed to timely submit a request for a hearing to contest the propriety of the IRS levy. Nevertheless, the LITC promptly filed a request for an “equiva-lent” hearing with the IRS Appeals Office. The LITC convinced the IRS Appeals Officer that the levy was inappropriate considering the client’s financial condition; and the IRS agreed to withdraw its levy of the client’s Social Security payments. Additionally, the LITC engaged a representative of the IRS Taxpayer Advocate Service, who secured a $4,000 refund of the client’s funds previously seized by the IRS.

IRS Abates Tax Liability of Homeless Woman The LITC represented a homeless woman in her late 50s who was living in her van and whose only source of income was from food stamps and recycling cans.

In 2009 the client operated a financially unsuccessful daycare business out of the home she rented. When her landlord failed to make his mortgage payments, the mortgage holder foreclosed, resulting in the loss of her home and termination of her daycare business. The client was left homeless and without any source of income. During this time the client and her former spouse were engaged in a bitter divorce proceeding. She obtained a restraining order against her former spouse to enjoin him from abusing her and her dependent granddaughter.

The client’s troubles continued into the next year when the IRS examined her tax returns and denied all of her daycare business expenses. The IRS sought a tax deficiency exceeding $11,000 from the client. When she learned that her IRS tax controversy was scheduled for trial before the U.S. Tax Court in Fresno in one month, she frantically sought the LITC’s assistance.

LITC student accountants subsequently obtained, analyzed and organized the client’s extensive documentation, including invoices, receipts and checks. The team prepared spreadsheets showing expense categories and documentation substantiating her business expenses. Additionally, the LITC prepared a com-prehensive declaration under penalties of perjury explaining the client’s story and referencing the documentation supporting her claimed business expenses. Because of the volume of records the IRS required to substantiate the client’s business expenses, LITC students coordinated and paid for shipping all necessary documents to the IRS. The efforts of LITC student accountants convinced the IRS to concede the entire tax liability of $11,000.

CSU Chancellor Timothy White and Accounting Area Chair Doug Cerf visiting the LITC in 2014

Christian Vargas assisting clients at a community outreach event

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The LITC has engaged in extensive community outreach and education in addition to assisting low-income taxpayers reduce their tax liabilities. The LITC collaborates with local organizations to educate individuals about taxpayer rights and respon-sibilities. The clinic has increased awareness of its services and provided education on specific tax topics that encourage clients to be financially responsible and promote a sense of financial independence.

The LITC has collaborated with numerous organizations, including the Women’s Shelter Program of San Luis Obispo, AARP Tax Aide, San Luis Obispo Legal Services Organization, Latino Outreach Council, San Luis Obispo Food Bank, and People’s Self Help Housing. Additionally, LITC students have engaged in commu-nity outreach at farmers markets, Head Start programs and local libraries.

The Cal Poly LITC is the only non-law school academic clinic that participates in the U.S. Tax Court Calendar Call Program. During these proceedings the LITC offers pro bono tax controversy assistance to taxpayers who have trials pending before the court and are not represented by counsel. The LITC has participated in this pro-gram since 2013 and has helped low-income litigants deal with complex substantive and procedural tax issues to resolve their tax disputes with the IRS.

The chancellor of the California State University system, Cal Poly administrators, and the IRS have commended the LITC for it services to the low-income taxpayer community.

“I had the unique opportunity of working with an appeals officer to resolve a tax issue for a business owner who was brought to trial. I was able to help gather supporting evidence and discuss our findings with the officer. The case eventually settled in favor of the taxpayer.”

—Christy Chao, on her experience at the 2014 Calendar Call for the U.S. Tax Court

COMMUNITY OUTREACH AND EDUCATION

Evan Kilbourne, Lindsey Sutton, Christine Pulford, Cameron Matthews and Eddy Quijano at the LITC’s first trip to the United States Federal Courthouse in Fresno, Calif.

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STUDENT TESTIMONIALS

“Personally, working in the LITC has allowed me to apply concepts from numerous business classes, while also improving my customer service skills. The LITC has been an unforgettable, positive experience that any qualified student should make part of his or her college experience as well.”

— Brianna Butterfield, Class of 2014

“LITC and VITA have been excellent examples of Cal Poly’s Learn by Doing philosophy incorporated into the accounting curriculum. Both senior projects have given me valuable and hands on experience working with clients in a professional environment and the opportunity to think critically about tax issues facing low income taxpayers.”

—Danielle Heller, Class of 2013

“The LITC has prepared me for a career in tax by assigning me to work directly with a client. Investigating the client's case has given me a deeper understanding of how the IRS sees a taxpayer ’s economic status. In order to put together a client's story, I have to understand the client well enough to be able to persuade the IRS to see our side of things, and being able to do so is a very rewarding experience.”

—Catherine Hsu, Class of 2015 “It has been a great learning experience to find out about how relief from IRS controversy comes about and that it is available for many people as long as they work with and communicate with the IRS. I have also learned how to write concise pamphlets, condensing a lot of information into a short, understandable and complete format to help people better understand complex issues.”

—Rory Van Wickle, Class of 2013

Because the Cal Poly LITC is a student-staffed and operated academic clinic, it measures its success based on the effectiveness of the tax controversy education, experiential leadership, and service learning of its students. Students work as accountants in the LITC as part of their senior project. Students grow intellectu-ally and professionally by addressing complex tax issues low-income taxpayers consistently encounter in an adversarial context while developing understanding, empathy and compassion for their clients. Students have consistently stated that their experience in the Cal Poly LITC has been the best part of their four-year college education. The experience has also created a cadre of compassionate, caring citizens who will continue to “pay it forward” in their communities.

Lisa Sperow, executive director of the LITC

Christy Chao, graduate student at the LITC

Rory Van Winkle, Class of 2013

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In 2010 the LITC was founded through the generosity of Chevron Corp. and a grant from the IRS Taxpayer Advocate Service. The clinic began with just one student accountant handling a handful of client cases.

Today 21 students actively manage 66 client cases, the most the clinic has ever handled at one time. Each year, the IRS has granted funds to Cal Poly’s LITC, which the Orfalea College of Business matches. Since 2010 the IRS has roughly doubled its grant funding for the LITC in step with the increased demand for its services. The 2015 grant from the IRS will support both the controversy work and outreach to communities that speak English as a second language.

A GROWING NEED FOR RESOURCES

SUPPORTING THE LITC

There are a variety of ways to support LITC’s mission of educating students and serving the community. Local tax attorneys, CPAs and alumni can volunteer their time and expertise year round to review cases and mentor tax students. To volunteer your time to the LITC, contact Lisa Sperow at [email protected].

Community support, gifts in kind, and corporate giving can also help the LITC meet the community’s needs. To give back to the LITC and support the next generation of tax professionals, visit www.giving.calpoly.edu.

Many employers also match philanthropic contributions to worthy causes, like the LITC. For more information on matching, visit www.giving.calpoly.edu/matching.

1 Grand Avenue, San Luis Obispo, California 93407–0448

877–318–6772 | litc.calpoly.edu | [email protected]

LOW INCOME TAXPAYER CLINIC