Collection Issues. From the National Tax Payers Advocates Office.
The report contains a detailed assessment of the IRS examination and collection practices, concluding that many practices have been developed piecemeal and that the IRS lacks an effective overarching strategy to maximize voluntary compliance. The report also concludes that IRS collection practices often harm taxpayers without producing revenue.
In particular, the report cites the IRS lien filing policies as the second most serious problem facing taxpayers. The IRS uses automated systems to file liens against taxpayers in a variety of situations, even when the taxpayer possesses minimal or no property and the lien will do little more than damage the taxpayer?s financial viability and access to credit. A study conducted by Olson?s office found no obvious causal relationship between the number of lien notices filed and the amount of overall revenue collected. Over the past decade, the IRS increased its lien filings by nearly 475 percent ? from about 168,000 in FY 1999 to nearly 966,000 in FY 2009, yet overall inflation-adjusted collection revenue declined by 7.4 percent during this period.
A second study found that the IRS procedures for determining a taxpayer?s ability to pay outstanding tax liabilities may be driving some taxpayers into long-term noncompliance because the IRS fails to consider other debts such as credit card balances, school loans, and actual hospital or medical bills. Other tax systems, including Sweden?s, consider the taxpayer?s overall financial picture.
?Any taxpayer with these debts will tell you that these creditors don?t go away,? Olson said. ?Taxpayers are placed in the intolerable position of agreeing to pay the IRS more than they can actually afford (given their other debts) and then defaulting on the IRS payment arrangements when they channel payments to unsecured creditors in order to get some peace. Thus, the IRS itself fosters noncompliance by its failure to take a holistic approach to the taxpayer?s debt situation.?
“The National Taxpayer Advocate recommends that Congress require the IRS, before imposing a lien, to make a determination that the benefits of filing the lien outweigh the harm to the taxpayer and will not jeopardize the taxpayer?s ability to comply with future tax obligations”.
The report of this practice has been going on for years and it is about time the IRS fixes it. What do you think?
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