IRS Increases Aggressive Tax Collection Efforts
Each year, the National Taxpayer Advocate (NTA) is mandated under the Tax Code to identify at least 20 of the most serious problems encountered by taxpayers and make recommendations about how to solve those problems in a report to Congress. (You can read the entire report here.)
Not surprisingly, this year the NTA, Nina Olsen, identified the need for tax reform as the number-one priority in tax administration. In the Executive Summary, the NTA notes a recent analysis of IRS data which indicated that taxpayers spend a whopping 6.1 billion hours a year in order to comply with filing requirements. "If tax compliance were an industry, it would be one of the largest in the United States," according to the report. "To consume 6.1 billion hours, the 'tax industry' requires the equivalent of more than three million full-time workers."
Also on the list of taxpayer problems? The NTA expressed continuing concern that the IRS's increasing use of hard-core enforcement actions is causing unnecessary harm for taxpayers. The report found that IRS collections efforts don't achieve the obvious goal of getting taxpayers compliant and staying compliant because of the harsh techniques.Specifically noted as an overly-harsh technique: filing liens. In FY2010, the IRS filed protective liens against 1.1 million taxpayers. Compare that total with 168,000 liens filed in FY1999; it reflects an increase of an amazing 550%.
In the past several years, the number of liens has accelerated. Over the past seven years, the number of liens filed by IRS is at least 5 million. This can affect credit ratings, making it hard to find affordable housing and, in some cases, a job.
In a tough economy, the IRS has continued to lien at an even more aggressive rate. The IRS has done this despite little to no effect on collections and may reduce long-term tax collections.
"By filing a lien against a taxpayer with no money and no assets, the IRS often collects nothing, yet it inflicts long-term harm on the taxpayer by making it harder for him to get back on his feet when he does get a job," Olsen said. "Absent data that show liens make a meaningful contribution to revenue collection and especially in this economy, I find it unacceptable that the IRS continues to torment financially struggling taxpayers in this way."
The NTA refers to IRS collections methods as the "same one-size-fits-all approach that it used 30 or 40 years ago" and urges the use of more modern collections efforts and encourages flexibility. The NTA recommends, for example, that the IRS make better use of collections alternatives available to taxpayers such as Offers in Compromise and Installment Agreements. Interestingly, the IRS has shown a marked decrease in granting Offers in Compromise, all while increasing the number of liens filed.
The NTA also expressed frustration that this isn't the first time collections and liens issues have made the list of taxpayer problems. Yet, despite making the list over and over in the last 10 years, neither Congress nor IRS has taken any significant steps to address those issues. The NTA has recommended that this become a immediate priority.
Olsen, who has held the position of National Taxpayer Advocate since 2001, reports to the Commissioner of Internal Revenue, Doug Shulman, on behalf of the Taxpayer Advocate Service (TAS), dedicated to helping taxpayers solve their problems with the IRS. TAS has at least one local taxpayer advocate in every state, the District of Columbia and Puerto Rico. You can find your advocate on the IRS website at Contact Your Advocate. You can also call the TAS toll-free case intake line at 1-877-777-4778.