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IRS Maneuvers Not Good for Credit Report

By Faye Mergel
Published: Tuesday, January 12th, 2010

Consumer advocacy groups complained that IRS agents are using property liens in order to force taxpayers into paying delinquent taxes. Advocates say such maneuvers can damage a credit report, which further hurts the already struggling American. Moreover, they view this practice as against the taxpayer protection law passed by the United States Congress in 1998.

IRS Maneuvers Not Good for Credit ReportTaxpayer advocate, Nina Olson, said the Internal Revenue Service increased its use of liens even if it cannot show any evidence that liens have indeed increased collection. Instead, Olson only observed a 7.4 percent decline in collections after a 475 percent increase of tax liens filed from 1999 to 2009.

Olson remarked that collection policies of the IRS are the second main problem facing taxpayers, just behind poorer telephone service. Her report revealed that only seven in every ten phone calls to the IRS were answered in 2009.

Liens are legal claims made against cars, homes, and other properties which must be paid before a property is sold. Last year, IRS filed 966,000 liens—way higher than the 168,000 liens it filed in 1999.

In Olson’s 86-page report, she noted that this increase in lien filings did not enhance revenue collection of the IRS. She came to the conclusion after her office reviewed 1.9 million accounts, 277,000 of which involving taxpayers who have liens on their properties. She remarked that IRS emphasizes to its agents the quantity, instead of quality, of liens filed against taxpayers.

Olson warns that instead of being beneficial to taxpayers, liens filed against them could only damage their credit report, which would make it more difficult for them to qualify for loans with lower interest rates. Moreover, lien notices on their credit report could make it difficult for them to get a job, purchase insurance with lower premium rates, and avail cheaper rents from landlords, experts comment.

However, the IRS says it does not report tax liens directly to credit bureaus. Instead, third-party vendors are the ones who typically forward tax lien information to bureaus.

Finance advisers warn consumers that tax liens on their credit report could have as much impact as a foreclosure or a delinquent payment. Since taxpayers are having more difficulties reaching IRS representatives, removing tax lien notices on their credit report might take longer for them.
Olson remarked that only 68 percent of calls to the IRS were answered in 2009, which marks a 15 percent decline from the number of successful calls in 2007.

Meanwhile, IRS retorted that it has answered 71.2 percent of calls in 2009. The IRS further said more than 90 percent of callers are satisfied with their services.

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