DONALD A. THUROW is a 59-year-old retired postal worker who lives in San Francisco. On July 2, 1986, he wrote his monthly $1,300 mortgage check to California Federal Savings and Loan, the bank holding his mortgage, and mailed it.

But the money never got to California Federal. Instead, the sealed letter was delivered to the Internal Revenue Service's San Francisco office and then forwarded to the agency's Fresno Service Center. Along the line, the envelope was opened, the check was removed and the words INTERNAL REVENUE SERVICE were improperly and probably illegally stamped over the name of the original payee in big black letters. On July 10, 1986, the government's $2 trillion dollar debt was reduced by $1,300 when Thurow's altered check was credited to the account of the Treasurer of the United States.

Donald Thurow says he first got an inkling that something had gone awry when an official from California Federal called and asked why he had not paid his mortgage. After a few days of confusion, he and the bank discovered the IRS had hijacked his mortgage check.

On Oct. 13, Thurow and his lawyer filed a claim for refund. They did not take legal action against the bank that had improperly cashed the altered check because they felt the bank was the victim. They asked the IRS only to return the $1,300 it had seized without notice and to pay him 10 percent interest and any late charges.

After six months had gone by without a response to his refund request, Donald Thurow filed a suit in federal court in San Francisco. "Altering a check without informing the taxpayer is improper and illegal," said Montie S. Day, Thurow's lawyer. "And Title 18 makes it a felony to open mail in transit and mail is deemed to be in transit if misdirected."

In his suit, Thurow again demanded the government return the $1,300 and pay him 10 percent interest. But this time he also wanted lawyer's fees and punitive damages of $50,000.

Jay Weill, an assistant United States Attorney in San Francisco, said Thurow's suit against the IRS was "frivolous," and for this reason has taken the highly unusual action of asking the court to order Day, Thurow's lawyer, to pay the government's legal fees.

In the government's response filed a few weeks ago, Weill acknowledged that Thurow's check had been altered but said the change had been made by a low-level clerk who misunderstood her instructions. He asked the judge to throw out the case, primarily because, he said, the IRS some months before had informed Thurow that he owed the government $285. Weill further said that although the IRS never specifically responded to Thurow's October claim for the refund, a check for $938.93 -- the difference between the $1300 mortgage payment and the amount the IRS claimed he owed the government -- was sent to the retired postal worker in December, five months after his check had been improperly cashed by the agency and he had filed his initial complaint.

Was the Thurow case just an isolated incident, a mere accident? Or is the possibly illegal opening of a first-class letter and the alteration of a check evidence that parts of the agency have developed into mindless destructive machines? Because of the vast size and power of the IRS -- the agency now has 100,000 employes who have been granted an arsenal of legal weapons far exceeding any other government agency -- this question is both important and hard to answer. But there are some indications that Thurow's experience is far from unique; that, in fact, the IRS not only makes more than its share of similar mistakes -- if that is what they can be called -- but also is contemptuous of the hapless victims when they call the IRS' attention to its errors.

Since filing the Thurow suit, Day, an Oakland lawyer, former IRS agent and assistant United States attorney, has learned about several other cases where the IRS cashed, or attempted to cash, checks that were not made out to the agency.

One such incident involved Kathleen C. Bregand-Baker, now living in San Jose. She said in her submission to the court that in November 1985 the IRS regional office in Philadelphia altered and cashed an $89 check she had made out to Visa. Robert J. Burns of Clayton, California, said that in October 1986 the IRS office in Ogden, Utah had altered a $286 check made out to City Corporation Savings.

A San Francisco woman named Amy Adney was involved in a slightly different kind of IRS incident. On Feb. 14, 1987, Adney recounts, she mailed a $570 check to her mortgage holder. The payee was "Shearson/Lehman Mortgage." When Shearson/Lehman informed Adney a few days later that her check had not reached its destination, the California woman stopped payment on it.

But shortly thereafter, Adney said, she received a brief undated IRS notice demanding the payment of $570. The explanation for the demand, judging from the markings on the back of Adney's check, was astounding. The IRS somehow had obtained the envelope addressed to Shearson/Lehman and then submitted the $570 check made out to the company for deposit in the United States Treasury. When payment was refused because of Adney's stop order, the IRS sent her a dunning notice. She said the next development was even more mysterious. When Adney filed an outraged demand for an explanation of the government's action, the IRS sent a second notice informing her she now had a $570 credit even though the agency never had been able to cash the Shearson/Lehman check because of the stop order.

Spokesmen for the IRS said that federal privacy laws prevent them from commenting on individual cases. But Larry Wright, an IRS official in San Francisco, told the San Francisco Chronicle that the "IRS does not have a clandestine arrangement with the Post Office to take over your mortgage payments to solve the national debt."

Day, however, believes that the alternative -- a mindless, largely unanswerable bureaucracy -- may pose a far more serious long-term threat to important constitutional rights than the conspiratorial model suggested by Larry Wright. It is this same concern that has prompted Sen. David Pryor (D-Ark.), who heads both the oversight subcommittee of the Senate Finance Committee and the Senate subcommittee on federal services, post office and civil service, to request a joint examination of the cases and the IRS' use of the mail.

Although the IRS declined comment on any of the cases, Marty Gomez, the spokesman at the IRS' Fresno Service Center, defended the agency's overall performance on the grounds that it has a difficult job. Every year, IRS offices all over the United States receive hundreds of millions of letters. The IRS Service Center in Fresno, for example, just one of 10 such centralized processing facilities in the United States, last year received more than 32 million pieces of mail.

But because the Postal Service has its problems too, a fair number of the first-class letters dumped off at the IRS loading docks actually are addressed to someone else. During just one recent busy weekend, for example, IRS spokesman Gomez said about 5,000 of the letters delivered to the Fresno Center alone were not addressed to the IRS.

Unlike the rest of us, however, because of the way it processes mail, the IRS doesn't look at a letter, notice it is addressed to someone else and return the misdirected envelope to the Postal Service. Instead, at Fresno and nine other regional centers, the agency has installed massive 50-foot-long machines to process in-coming mail. The machines have three distinct functions. First, they quickly read the bar codes on the pre-addressed envelopes the IRS supplies taxpayers. Then they shoot the letters to 36 different pockets. The machinees dispatch envelopes without such codes to a 37th location. Their third major function is to mechanically open all incoming envelopes.

Marty Gomez said the workers assigned to the mail machines are instructed to try to remove the misdirected mail before it enters the automated sorting process. But because of the massive volume, he acknowledged that some of the envelopes not addressed to the IRS are placed in the machine where a "sanding disk" opens all incoming mail and sends it along to what is called the extracting center. There, clerks look into the envelopes and extract the contents.

"Material not meant for the IRS is then stapled and returned to the Postal Service," explained Gomez. "But with the volume we're dealing with, extractors sometimes make mistakes."

Although the IRS insists its assembly line process is required for the efficient processing of tax returns, Montie Day replies that the automated opening of the letters clearly violates the law. "I am not suggesting criminal prosecution of the individuals running the machines. But I certainly question the good faith of the government in adopting such mail handling procedures in the face of current law and several relevant court cases," he said.

The lawyer said the second aspect of the IRS' action presented even more serious legal questions. After the misdirected envelopes have been opened, he said, it appears they are sent to what is called the "Document Perfection Branch," where IRS employees check to see whether the envelope contains anything of interest. Day said he believed it was here that checks sometimes are altered.

"There are two significant legal problems here," Day said. "First, even assuming the individual in question owes the government money, the government is required by the Constitution, the law and its own regulations to provide that individual advanced notice that it is going to make a seizure. Then there is the question of the check alterations. If an individual started altering checks, he normally would be prosecuted for forgery. Is the IRS exempt from the law?"

But the questions about the IRS and the Postal Service don't end with the opening of misdirected mail. In a 1985 letter to a San Francisco lawyer named Bartholomew Lee, for example, the Postal Service said that in recent years it has undertaken about 1,700 "mail covers" each year for the IRS. A mail cover is an investigative technique where the Postal Service records the name and return address on the outside of all letters going to an individual selected for investigation.

Because mail covers, unlike wire taps, are not supervised by the courts, Day, Lee and a number of other lawyers around the country have become suspicious that the IRS may be abusing the process. They also worry that some IRS agents may be deliberately opening the first class mail of individuals they have targeted for tax investigations.

Tantalizing direct evidence of the IRS' use of the Postal Service during the course of a tax investigation emerged during the 1984 trial of a South Dakota tax protestor named Robert A. Hawley. During the discovery proceedings before the trial, the Justice Department inadvertently gave Hawley's lawyer, Guy C. Curtis, a copy of an Oct. 28, 1983 memorandum about the Hawley case that had been sent to Glen L. Archer Jr., the assistant attorney general for tax matters.

The memo warned that some of the evidence against Hawley that had been obtained by the IRS came from the Postal Service and should be kept secret. The exhibits in question, the memo continued, "are not to be introduced in the criminal trial and they should not be disclosed to anyone outside the Department of Justice and the Internal Revenue Service. To disclose the above-referenced exhibits could jeopardize a confidential source, as well as expose an undercover investigative technique."

Both the Justice Department and the IRS have refused to disclose any details about the secret undercover technique mentioned in the 1983 memo. Lawyer Curtis cited the refusal of the two agencies -- and the failure of the district judge to grant an evidentiary hearing about the surveillance -- in an unsuccessful appeal of his client's conviction.

The questions of how the IRS goes about the business of collecting taxes and responding to citizen complaints of arbitrary unfairness are important not only because questions of basic fairness are involved but because the United States necessarily relies on what Margaret Levi, a professor of political science at the University of Washington, calls "quasi-voluntary compliance." In her forthcoming book, "Of Rule and Revenue," Levi argues that without a fairly high degree of such compliance, the cost of enforcing the tax laws and collecting taxes could become impossibly expensive. Too many horror stories just might undermine public confidence in the voluntary system and destroy the reservoir of taxpayer goodwill that maintains it, leading to a result that nobody should want -- an enormous expansion of the IRS and its police powers.

David Burnham, a 1987 Fellow of the Alicia Patterson Foundation, is working on a book about the IRS.