In her annual report to Congress, the in-house taxpayers advocate at the Internal Revenue Service, said that the severe tactics used by agents may do more harm than good when the agency tries to collect back taxes.
According to its own statistics, about 86 percent of taxes owed are collected, and the other $300 billion or so, must be pursued by IRS collection agents.
National Taxpayer Advocate Nina E. Olson, said in her report Wednesday that the liens the agency places on delinquent taxpayers can help ruin their credit scores, thus limiting job opportunities, access to insurance and even rental housing. The Washington Post reported Olson as saying the use of “hard-core collection tactics is inflicting unnecessary harm on financially struggling taxpayers.”
Olson said the collection tactics actually may make it more difficult for the IRS in its long term collection efforts. Although she has been critical of the widespread use of liens in previous reports, she said that in the current struggling economy, the IRS should look for other means to collect back taxes.
The number of liens filed by the IRS has risen sharply in recent years, hitting 1.1 million in fiscal 2010. That’s a sharp contrast to only 168,000 liens filed in 1999. Even though the filing of liens has increased dramatically, the amount collected though such efforts have remained flat.
Olson said that the agency should spend more time working out payment programs with delinquent taxpayers, even though the approach is more costly and time-consuming. Filing liens against taxpayers with little income and no assets is not productive, she 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,” she wrote.
Olson also called for simplification of the tax code, which is too complicated for most taxpayers to comprehend sufficiently, to prepare their own tax return. About 90 percent of taxpayers use a tax preparation service or software.
The tax law is so confusing, that the IRS received over 110 million telephone calls in each of the last two years seeking help preparing returns, and agents were unable to solve taxpayers issues in over 25 percent of the calls.