Smart TaxesSmart Taxes

Watchdog: IRS tormenting taxpayers

Liens for unpaid taxes rose 14% last year. The IRS says it gives people ample chances to pay, but advocate decries practice.

By Teresa Mears Jan 5, 2011 4:11PM

This article is by Stephen Ohlemacher of The Associated Press.

 

A government watchdog says the Internal Revenue Service is tormenting struggling taxpayers in the midst of a slumping economy by increasing the number of liens the agency has filed against people who owe back taxes.

 

The IRS filed nearly 1.1 million liens in the budget year that ended in September, a 14% jump over the previous year. Liens punish taxpayers and often hurt their ability to pay back taxes, National Taxpayer Advocate Nina E. Olson said Wednesday in her annual report to Congress.

 

"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," said Olson, an independent watchdog within the IRS. "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 IRS responded that liens are not filed until taxpayers are given numerous opportunities to pay their tax bills, or sign up for payment plans.

 

IRS spokeswoman Michelle Eldridge said the agency has taken steps to help taxpayers facing financial problems, including increased flexibility in installment agreements and other collection efforts.

 

"The IRS recognizes that many taxpayers are struggling financially," Eldridge said. "The IRS has taken numerous steps to help taxpayers facing tough times in the past two years."

 

Each year, Olson reports to Congress on the issues she deems important to administering the tax code. This year, Olson highlighted collection efforts, the complexity of the tax code and the need for tax reform, and the challenges facing the IRS in implementing the new health care law.

 

Liens give the federal government a claim on property to help secure payment of back taxes. They are filed publicly for tax debts that are deemed uncollectable, alerting creditors and others that taxpayers owe back taxes.

 

Olson criticized the IRS policy of automatically issuing liens in some cases. According to Olson's office, a lien is automatically filed if a delinquent tax debt exceeds $5,000, unless a collection employee gets a supervisor's approval not to file it.

 

IRS spokesman Terry Lemons, however, said taxpayers get multiple opportunities to apply for an extension, enroll in a payment plan, or even apply for a program that allows some taxpayers to pay less than the full amount they owe.

 

"Before you get to a lien, you're going to have many communications from the IRS," Lemons said. "You'll have multiple opportunities to talk to us."

 

Olson has criticized the use of tax liens in the past, and said the response from the IRS was inadequate. The number of liens filed last year was more than five times the number filed in 1999, Olson said in her report.

 

However, Eldridge said the statistic is misleading because the number of liens dipped in 1999 because the agency was going through a massive restructuring mandated by a 1998 law.

 

"A better metric is comparing the current lien level of 1.1 million to earlier levels in the 1990s," Eldridge said. "The number of liens routinely topped 750,000 each year, and reached 1.4 million in 1992."

 

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

More from MSN Money:

VIDEO ON MSN MONEY

44Comments
Jan 19, 2011 3:48PM
avatar
I work in a tax prep office and I have seen first hand that the IRS makes HUGE mistakes and is not usually quick to correct them. I wrote 5 letters in one year regarding back taxes for a client (including proof of payment). We did not receive any responses from the IRS until a lien notice came in the mail. When I called they had no record of any of the letters, not one! Of course a week later a get another notice acknowledging that they (suddenly!) received my correspondence and were working on it. This was 11 months after the initial letter was sent! This is one small example, I have tons more. Yes, you can find an intelligent person to help you with your problem, but there are plenty of negligent employees who are not doing their jobs.

Jan 19, 2011 3:59PM
avatar

Funny thing is that if the IRS owes you money they can just keep sending you letters stating they are reviewing the status.  I have a friend that qualified for the long time homeowners tax credit.  They filed their return last April.  They have faxed over 30 pages of documentation and finally had to get an account involved to ge the IRS to "approve" the documentation for the $6,500. 

 

the IRS waited 90 days (July 8th) before sending out the first letter stating :We are reviewing your case, we will contact you if more information is needed."  90 days (around Sept 12th) later the second letter arrived stating "We need more documentation." She faxed the information to then and made a follow-up call. During the follow-up call she was told "Your return goes to the bottom of the stack of cases we are reviewing, it will be about 6-8 weeks before your return is reviewed again.  A week before the 8 weeks was up, she received a letter stating that they needed another 30 days to review the information.  Then she received a denial letter, without a reason why it was denied.  She called in once again and the person she spoke to says " I can see where you did live in the house for the required number of years, but your paid tax receipts are not enough proof that you owned the property! 

 

She then got an accountant involved you got the IRS to agree that she did qualify, however most of the IRS staff was taking two weeks off for the Christmas Holiday and her case would be looked at and okayed when they returned in January. January 7th the accountant was notified that it would take another 3 weeks to have the check processed and sent.

 

It doesn't sem right that they can file a lien during these tough economic times but the IRS just has to send a form letter and they aren't held accountable.

Jan 19, 2011 2:52PM
avatar
 Maybe the IRS should go after their head guy & Treasury Sec. and all the other congress men and women who do not pay their taxes and then make a deal. You or I try it and guess where we will be da behind bars and will loose everything
Jan 19, 2011 2:17PM
avatar
The IRS as it stands is a prime example of the addage 'authority with no responsibility'. They act as if they are above the law in all cases, as a matter of fact, they answer only to themselves and are not in touch with reality. I have heard of many cases of improper handling of cases that were found to be a 'mistake' and yet the individual as well as their standing in society and their job were all lost, yet no responsibility fell on the IRS personnel responsible for the 'mistake'. This is what happens with run away federal government.
Jan 19, 2011 5:06PM
avatar
Anyone who claims that paying your taxes on time and correctly will guarantee that you will not have any difficulties with the IRS is living in a fantasy world. The IRS is the single most powerful entity in the US today. They make decisions that negatively affect peoples lives by bureaucratic decree, with no regard for the rule of law. They can seize your bank account, retirement account, they can put a lien on any personal property, and seize said property any time they like without due process. They don't even have to be correct in their own figures. Their fines and interest loads are usurious by any standard in use today and would qualify for a RICO investigation were they levied by any banking institution or Mafia loan shark. Their problem resolution office is a joke and only adds to the length of time of your case. If they seize your assets in error, they are not required to return the assets for a full 45 days and you can not charge interest or penalties. In any dealings with the IRS of a negative nature the IRS will tell you that your only recourse is to pay up and then take them to tax court  for amelioration of the case. This kinder and gentler IRS is the average citizens worst nightmare.
Jan 19, 2011 2:58PM
avatar
Trust me when I say we worked with the IRS!!! They still filed a lien on our property AFTER we worked out a payment plan! I would think they would file a lien if we failed to make our monthly payments but NO they did it as soon as we set up a payment plan. They sent us a letter like a month after setting up the payment plan about filing the lien. I call that tormenting! We had nothing to begin with which is why they more than likely filed the lien...who really knows with the IRS????? They do what they want to I assure you! The IRS is run by a bunch of JERKS!
Jan 19, 2011 2:03PM
avatar
this being coordinated by a guy brought in that should be in jail for not paying taxes, hmmm, great for the country!
Jan 19, 2011 3:10PM
avatar
They froze my bank accounts and took all my money for a tax debt that belonged to my EX HUSBAND.  They say it will take 6 to 12 months to clear up.  What am I supposed to do until then?
Jan 19, 2011 3:05PM
avatar
Nice! Is it any wonder why the IRS added 25% more auditors to audit the self employed and reduced the auditors working on large corporations? The problem with their deal is that for a tax liability of $4000.00 no matter what the reason for is was, turns into a $60,000.00 tax bill after they add penalties and interest. There is no way the average person can possible pay that kind of money to catch up. Then they lein your property so even if you wanted to you couldn't borrow funds to pay the tax bill. Then they hound you and make it impossible to find work. I've seen this story over and over. Why is it they aren't auditing Goldman Sachs? Incendently these people that owed the original $4000.00 attempted to make a payment deal with them that they just flatly rejected and stated that because of past tax filings they could afford to pay $15,000.00 a year on the inflated tax bill for the next four years even though they weren't even working! So you call that polite? They also raided the guy's only checking account and cleaned it out making off with his last $3000,00. He had to borrow money from friends to pay his mortgage and his other bills and now he is forced to work for cash only and keep his earnings in a box.   
Jan 19, 2011 2:43PM
avatar
And by the way, Restore, I just got a letter of demand bfrom the IRS for failing to report income. Went to my tax preparer, they culled the necessary forms from my tax return which shows I did indeed pay all my taxes. Want to bet I won't even get a letter of acknowledgement or a letter of apology from  thes equal opportunity clowns?
Jan 19, 2011 3:11PM
avatar

I have been unemployed for over 2 years, make 202.00 per week on unemployment, and I'm supposed to ask for a payment plan?  And pay with what?  I have not been to a Dr. or dentist in over 2 years, I cannot ask for financial assistance from family or friends, they are either in the same boat, nearing it or have done all they can for me given that I no longer can even say that I'll pay them back when I find work.  Find work?  Get real, with my poor credit score I doubt Wendy's would hire me to take out the garbage.  Ask for a payment plan?  What for?  I don't have a pot to piss in or a window to throw it out of but I still owe the IRS and they want their money.  Now.

You who have jobs and can afford to pay your taxes?  Good for you Restore.  What do you want a medal or a chest to pin it on?

Jan 19, 2011 2:38PM
avatar
What good are "payment plans" when you have been out of work for months and you still can't find a job? Bail out banks and Wall Street. Your Guv'mint at work.
Jan 19, 2011 5:18PM
avatar
Restore, do you star in those Walmart commercials about living in "Perfect". You need to educate yourself how the IRS assesses their penalties and calculates their interest. This link should help explain how they calculate their penalties:
http://www.ehow.com/how_7482722_calculate-irs-penalty.html
As far as the interest goes, it is CAPITALIZED. The interest is calculated daily and added to the principle ON A DAILY BASIS.

How can anyone expect to dig themselves out of a whole like that. The IRS is worse than any mob bookie you'll ever meet.

Also, if the IRS garnished your wages they can take up to 75% of your disposable income. That means you get paid, your employer takes out federal, fica, state and local taxes and then the IRS gets 75% of what's left. THEN if there's anything left you can pay your medical premiums, 401K, etc. Yeah, sure, you can claim hardship but your idea of hardship & the IRS's idea of hardship is completely different.

As for the IRS agents being nice. Yeah, they're usually pretty nice, but the shark smiled at me too!

Jan 19, 2011 5:02PM
avatar
Oh yeah and GOD forbid you send them any documentation!!  They will tell you everytime they did not receive it!! I have never seen a worse government entity in my life.  I find it truly amazing that when you owe them money they can find whatever you in have in a split second, but when they owe you money they take months to dig into every return you've ever submitted!!
Jan 19, 2011 5:09PM
avatar

I have never heard on any news outlet about the supposed tax missteps by Geitner or Rangel being charged, fined, jailed or punished. What would happen to any of us under like circumstances? That matches my theory that no one in government works at their job and are exempt from having to live our real life.

Jan 19, 2011 4:39PM
avatar
It seems that raising our kids with all of the happy faces and everyone wins approach was wrong.  You couldn't tell the educators otherwise at the time.  Grow UP!  The IRS is not perfect and they make mistakes, but too many people today IGNORE their obligations.  I am sick to death of footing the bill for everyone else who feels that they can walk away from their bad choices and decisions in life.  Everyone wants healthcare regardless of what is wrong.  We are a socialistic country operating under a democracy.  The masses want everything and now.  No one should have to deny themselves anything.  As I grow older, I am happy that my years are shorter and I won't probably live to see this country self implode.  We have become selfish, and demanding spoiled children and demand way too much from our government.  For everyone to complain about the IRS is ridiculous - just where do you think the money comes from to pay for all of this nonsense?!
Jan 19, 2011 4:54PM
avatar
The IRS is FULL OF S#$%!!  I was a victim of identity theft and have been trying to get it cleared up for over a year.  I've waited 7 months to get my refund from 2008 and it's always were working on it.  They sent me one letter in May of 2009 to tell me they were of course working on it and since then nothing!  I have called numerous times only to be told it's still being worked on.  It is now 2011 and I still do not have my refund from 2008 and had to get a Tax Payer Advocate involved.  It is absolutley unacceptable to have to wait 7+ months to get anything resolved.  If the IRS was a business they would have shut down eons ago!!
Jan 19, 2011 4:09PM
avatar
The Imperial Ripoff Service has a 10% higher interest rate than my downtown loan shark. No wonder the honest people cannot pay. 
Jan 19, 2011 5:01PM
avatar
I can see Hilljack does not know the IRS very well do he. 
Was employed by them for 21 years & know full well what their idiot management makes the field people do. Example there used to be a set amount of several thousand dollars before a lien had to be filed. That has changed since they have hired all the analyst at grades 13 & 14 who have to justify their existence. Now if taxpayer owes $ 200. it is required liens be filed. This makes it impossible for taxpayers to borrow money to pay the tax. Brilliant idea!
Jan 19, 2011 5:19PM
avatar
My big gripe in the past has always been the "automation" if you are on a payment plan and even though you send in your payment a week or so in advance, but it's received or processed "late" (like during the holiday season), you are "automatically" booted off your payment plan, a lien is filed, and you are charged even more fees to get put back on your payment plan (regardless of the postmark on the envelope, and despite the fact that your payment was otherwise processed without incident) - it's just too convenient to blame everything on the computer nowadays ("Sorry, nothing I can do about it (even if I wanted to), it's "automatically" done by the computer.") - and of course it's always implied that "fixing" the computer is just out of the question.  By the way, it's not just the IRS on this issue, far too many businesses use the "computer / automation" excuse to hide questionable treatment of "customers".
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.