In her annual report to Congress this week, U.S. Taxpayer Advocate Nina Olson said that the IRS increased the number of liens filed against taxpayers for unpaid bills by a 475 percent margin in the past decade.
“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,” said Olson in her report.
According to Olson, 966,000 taxpayer liens were filed in fiscal year 2009, up from 168,000 in fiscal year 1999. She noted that despite the near-quadrupling of this figure, actual revenue collections only increased by a 7.4 percent margin during this time.
Worse for taxpayers, she added, they may find their credit scores damaged by liens because of circumstances beyond their control, such as medical debts, or other factors like school loans. Such issues have commanded a greater share of the spotlight in the past year as the nation’s unemployment rate climbed to above 10 percent.
Those who do not pay their taxes on a lien will feel the damage to their credit score for 15 years, notes Experian.com. In contrast, paying off the tax debt will damage a credit score for seven years, which is the same amount of time a credit card delinquency will show up. Also, those who file for bankruptcy will see their credit score typically damaged for 10 years.
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