IRS's 'hard-core' collection tactics needlessly harm taxpayers, report says
Wednesday, January 5, 2011; 7:52 PM
The Internal Revenue Service's increasing use of "hard-core" collection tactics "is inflicting unnecessary harm on financially struggling taxpayers," an in-house critic at the IRS said Wednesday.
The IRS routinely imposes liens on delinquent taxpayers, thereby damaging their credit scores and potentially jeopardizing their access to jobs, insurance and even rental housing, National Taxpayer Advocate Nina E. Olson said in an annual report to Congress.
By making it harder for taxpayers to get back on their feet, the IRS might actually reduce long-term tax collections, Olson wrote.
Olson serves as an independent ombudsman within the IRS, and her office helps taxpayers resolve problems with the agency.
She has complained about indiscriminate use of liens in the past but emphasized the issue in her latest report, saying the IRS has refused to moderate its practices "despite the worst economy in at least a generation."
Though lien filings have soared over the past 11 years, revenue brought in through the IRS collection program "has remained flat," Olson wrote.
The IRS filed 1.1 million tax liens in the 2010 fiscal year, nearly double the 522,887 it filed in fiscal 2005. The number has risen sharply amid the high unemployment, recession and real estate crisis of recent years.
IRS spokesman Terry L. Lemons said the agency recognizes that many taxpayers are struggling financially and has offered them greater flexibility over the past two years.
As it collects money to pay the government's bills, the IRS must juggle potentially competing concerns - Making sure those who pay what they owe are not unfairly shouldering the burden for others, but not squeezing delinquent taxpayers beyond reason, either.
A tax lien is a legal claim the government files against a taxpayer's property to secure payment of money owed.
The IRS automatically files liens on delinquent taxpayers who owe $5,000 or more, but it is preparing to test what will happen if it uses liens more sparingly, IRS spokesman Frank Keith said. Under the pilot programs, the IRS will raise the dollar threshold and refrain from filing liens on taxpayers who have "no real property," Keith said.
In addition, the IRS will put in place procedures to withdraw liens when taxpayers have paid their debts to the IRS and can show that the liens are causing them harm, Keith said.