IRS Increases Aggressive Tax Collection Efforts

The IRS has gotten increasingly more aggressive with its tax collections practicesThe need for tax reform and the IRS's harsh collection techniques top taxpayers' most serious problems, according to the National Taxpayer Advocate (NTA) annual report to Congress.

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.

Are Contributions to School District Programs Tax Deductible?

The IRS allows you to claim a deduction for the donations you make to qualified organizations. These organizations include more than just charities and will include any school district program that does not operate for profit and is solely supported by state and local governments.

Read More

Brought to you by TurboTax.com

What is Form 1099-NEC?

The IRS has reintroduced Form 1099-NEC as the new way to report self-employment income instead of Form 1099-MISC as traditionally had been used. This was done to help clarify the separate filing deadlines on Form 1099-MISC and the new 1099-NEC form will be used starting with the 2020 tax year.

Read More

Brought to you by TurboTax.com

Do I Qualify for Earned Income Credit While on Unemployment?

Receiving unemployment benefits doesn't mean you're automatically ineligible for the Earned Income Credit, but there are other requirements you'll also need to satisfy to claim the EIC.

Read More

Brought to you by TurboTax.com

Guide to Short-term vs Long-term Capital Gains Taxes (Brokerage Accounts, etc.)

Not all capital gains are treated equally. The tax rate can vary dramatically between short-term and long-term gains. Generating gains in a retirement account, such as a 401(k) plan or an IRA, can also affect your tax rate.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.