Chasing the Issue

“It’s not my fault! My accountant filled in the form.”

Caroline Ciraolo can’t tell you how many meetings with new clients have begun with those words. Her practice focuses exclusively on white-collar defense and tax controversy, which means she handles tax matters for businesses and individuals, but not until they are in dispute.

“We have clients who are non-filers and haven’t filed tax returns for a number of years,” says Ciraolo, a partner at Rosenberg Martin Greenberg. “They think that if they don’t have the money to pay the tax when it’s due that they should simply not file at all. But that’s the worst thing they can do, because then they start accruing penalties, from failure-to-file to failure-to-pay. And not filing is not only a civil violation, but it’s a criminal violation as well.”

When she explains these facts to perplexed clients, she does so with eloquence and enthusiasm.

“She does a great job of communicating an understanding of the procedures and nuances to her audience,” says Jeffrey Markowitz of Miles & Stockbridge. “Her knowledge of the subject matter is tremendous, which she then applies to representing her clients in trying to get a just result for them. She’s an incredibly motivated person and she works very hard for her clients. [That’s why] Caroline is one of the first people I choose to send referrals to for tax controversy matters.”

Some of Ciraolo’s first meetings with clients don’t occur until the Internal Revenue Service has initiated an audit; and for some of those clients, the audit is their first inkling that something is amiss. One client was shocked when the IRS came knocking. He’d diligently paid his taxes every year … or so he thought. He’d made his checks out to his accountant instead of the U.S. government—his first big mistake—and the preparer simply cashed the checks instead of paying the taxes. The preparer also inflated the amount of the return with bogus deductions and pocketed the overage. When audited, Ciraolo’s client was facing huge back taxes, interest charges and stiff penalties.

“It’s one of the biggest misconceptions taxpayers have,” says Ciraolo. “This belief that once they give their tax records to an accountant they pass along their responsibility as well. They sign their return without fully reading it and think their job is done. But, really, they have a responsibility to review their tax returns for accuracy and to sign under penalties of perjury. We all do. We can’t just blame the preparer when there’s a problem.”

After Ciraolo assesses her client’s situation, she calls over to the Fallon Federal Building, which houses the IRS. It also happens to be just across the street from her office in downtown Baltimore. “That’s where we have our administrative meetings with revenue agents, revenue officers and revenue council,” she says.

When she runs into a brick wall at the Federal Building, the person she turns to is James Leith, the taxpayer advocate for Maryland. The Taxpayer Advocate Service is an independent organization within the IRS designed to help taxpayers resolve problems and to recommend changes that will prevent more problems.

“One thing I’ll say about Caroline,” Leith says, “she’s only bringing cases to my attention where she’s absolutely completely frustrated at the lack of cooperation she’s getting from IRS. … She has a wide-ranging, very thorough understanding of all compliance activities that are conducted at the IRS. I know my staff has learned a lot about tax administration by working cases where she’s the attorney. I think we all benefit from her involvement in a case, both her client as well as the Internal Revenue Service—my staff included—which is a real tribute to her ability.”

In cases where an agreement can’t be reached, she handles the litigation. The trip to the courthouse is a bit longer than to the Fallon Building. It’s a block away. “You can actually see the courthouse,” she says, leaning a shoulder against her 21st-floor office window and pointing. “Right there. I can’t imagine a better location. I’ve even got a nice view of the harbor. And if I want to know what the traffic is like when I’m ready to leave, I can just look outside and see.”

Not that she ever leaves early enough for rush hour to be a concern. “She has a tremendous work ethic,” says Markowitz. “I remember when she was pregnant with one of her children, she was always working.”

Part of the reason the 43-year-old Ciraolo is so familiar with the ever changing landscape of tax law is because she takes every opportunity to go after new and important issues. “Chasing the issue” is a phrase she uses to justify taking certain cases when a client can’t afford counsel, or discounting time spent researching complex issues. “Chasing the issue, as opposed to chasing the dollar, means that I’m in the case because it involves an issue that is new to our practice—an issue of first impression for the IRS or the court involved, or an issue that is simply intellectually challenging. Many tax controversy cases involve similar fact patterns and legal and procedural issues; but it is the cases that present new and intellectually challenging issues that remind me of why I love this practice area.”

An example is a case in which Filipino teachers in Baltimore City schools hadn’t paid taxes, after their preparer advised them they were exempt due to a provision in the U.S.-Philippines Treaty. Ciraolo was intrigued and agreed to represent the teachers pro bono. “We knew these cases would proceed to trial, the issues were very interesting and the teachers needed a strong advocate,” she says. “We represented three of the Filipino teachers and tried the cases simultaneously, but separately briefed each one. The court found that the wages were not exempt, but held that no penalties should apply based on reasonable cause and lack of willful neglect.”

When major tax issues arise in cases she isn’t handling, Ciraolo still tries to stay on top of them. “I like reading important cases and seeing how they turn out,” she says.

She pauses and her smile grows wider. “I like to sit and read the [tax] manual.”

Ciraolo has always loved the precision of numbers. Her parents, Midwesterners, moved to South Carolina, then to Ewing Township, N.J., when Caroline was 4 years old. Even at that age, she was inclined toward numbers.

“I’m a big fan of math,” she says, “a big fan of logic problems, a big fan of starting here and knowing that to solve a problem you have to go through the various aspects very methodically to get there.”

To get where she wanted to go—college—she knew she had to work. At 14, she took food service and waitressing jobs in town. She waitressed through high school and through her undergraduate years at the College of New Jersey, where she earned a B.S. in finance, and until her second summer at the University of Maryland School of Law, when she started clerking for a solo practitioner. After earning her J.D., she worked as an associate for the solo practitioner while attending the University of Baltimore School of Law to work on an LL.M. in taxation.

“I worked up the street and would go to class at night at U.B.,” she says. “I used a credit card to pay for my LL.M. tuition. It took years to pay off.”

When she clerked at the U.S. Tax Court in D.C., she returned to waitressing, working the graveyard shift on weekends at Valentino’s until she was hired as a bankruptcy associate at Martin, Junghans, Snyder & Bernstein. She still managed to finish her LL.M. in one year.

“I find that the busier I am,” she says, “the more efficient I am.”

She waves a hand at the orderly stacks of paper covering her desk. “I’m into piles,” she says. “But there is a method to my madness.” She stacks her client files in the order she plans to review them and goes through them one at a time, spreading a file’s contents across the desk as she reviews it. “When that’s done, that goes into a pile and I start over.”

While her regimented system speaks to her meticulous nature, it is the dish of chocolates on her desk that speaks of the trait that makes her so successful—empathy. She offers the chocolates to anyone who enters her office, from co-workers to disgruntled clients. Even IRS agents.

Some people are harder to win over than others. Ciraolo once advised Joe Moore, of Williams, Moore, Shockley, Harrison, on a complicated tax case in which a third party kept telling Moore to “‘Get that girl to step aside,’” Moore remembers. “He kept calling her ‘That girl.’ … When Caroline finally resolved a very complicated matter regarding this combination of Internal Revenue tax liens and local tax sales, he called me back and said, ‘Well, I never thought it would happen, but that girl you hired got the job done.’ So I called Caroline and I said, ‘Well, Caroline, there’s bad news and there’s good news. He still calls you “that girl,” but now he says it with awe in his voice.’”

She is just as successful at winning over opposing counsel. In another case that Moore worked on with Ciraolo’s firm, the opposing attorney felt the chances for a settlement were impossible and dared Ciraolo to create one that would be satisfactory to his client, offering her “a big kiss” if she could resolve it. She dared and succeeded. After the case was resolved, Moore got an email from Ciraolo with a photo showing her holding a present from the opposing counsel: a gigantic Hershey’s chocolate kiss.

“She’s just so good at winning people over,” says Moore. “She has a wonderful sense of humor and is not one of these attorneys who flaunts her capability. She is quietly and unassumingly competent. But people who deal with her recognize her competence very quickly.”

Honesty helps. “She’s always quick to point out the weaknesses of her case just as quickly as the strengths,” Leith says. “You don’t always get that from the practitioner community. She’s not just throwing a bunch of arguments at the wall and seeing what’s sticking. She’ll talk to the client and say, ‘Here’s the relief I can get you. It may not be what you want, but here’s what you’re entitled to and I’m going to advocate accordingly. I’m going to limit our arguments to these issues. I’ll be a very vocal advocate and I expect us to prevail.’”

Ciraolo is active in the Maryland Volunteer Lawyers Service, where she solicits the legal community for volunteers to work the backload of IRS cases the group has in its inventory. And when those volunteer lawyers need educating on the labyrinthine processes of the IRS code, she steps in to teach classes and serve as a mentor. “It’s one of the favorite parts of my job,” she says.

Even in her own office, Ciraolo seeks to educate. She encourages associates to take challenging cases and works with them to identify key issues and solutions. “We often debate issues in the office,” she says, “and push each other to develop the best possible arguments.”

She isn’t simply the teacher, either. “I learn something new in every case,” she says.