The Internal Revenue Service ramped up its use of liens, levies and seizures last year in an effort to close the tax gap, pressuring taxpayers trying to cope with the economic downturn.

A recent report by the Treasury Inspector General for Tax Administration found that the service increased its overall use of compliance and enforcement tools over the past year (see IRS Workforce Challenged by Changing Tax Laws). The use of tax liens has increased by 74 percent since fiscal year 2006, according to the report.

During fiscal year 2010, the number of liens issued by IRS tax collectors and the agency’s Automated Collection System increased by 14 and 13 percent, respectively. The total number of levies increased by 4 percent during fiscal 2010, which included a 73 percent increase in levies issued by the Collection Field function to 667,322, although that increase was partially offset by a 5 percent decrease in levies issued by the Automated Collection System to 2,939,496.

Seizures increased 4 percent in fiscal 2010 to 605, but the report acknowledged that they remain 11 percent lower than the five-year high in fiscal year 2007 of 676 and are 94 percent less than the 10,090 seizures in fiscal 1997.

Back in February, the IRS announced that it was making major changes in its tax lien process to help taxpayers struggling with the lingering effects of the recession (see IRS Overhauls Tax Lien System). That included plans to significantly increase the dollar threshold when tax liens are issued in order to lower the number of liens, and to withdraw tax liens in cases where a taxpayer has entered into a direct debit installment agreement with the IRS to pay off outstanding tax debts. The IRS also expanded the use of its streamlined offer in compromise program to help more taxpayers.

Those changes were welcomed by National Taxpayer Advocate Nina Olson, the head of the Taxpayer Advocacy Service, who has long been urging the IRS to take a gentler approach. However, she warned at the time that the changes do not go far enough. For example, one of the main problems with the lien process is that many struggling taxpayers don’t own enough property to which the liens can be attached. That’s especially true at a time when unemployment is over 9 percent and home foreclosures remain at stubbornly high levels. The TIGTA report indicates that the IRS was actually increasing the use of the same enforcement tools last year that it now intends to soften this year.

Still, the service has been under pressure to increase its collections and enforcement efforts in the ongoing struggle to close the elusive “tax gap,” estimated to be between $290 billion and $345 billion, between the taxes owed and actually collected every year. To that end, the IRS’s Criminal Investigation division has been increasing its investigation and enforcement efforts, according to a separate TIGTA report issued this week (see IRS Criminal Investigators Stepped up Activity).

With the IRS under pressure to close the tax gap, and the federal government under pressure to close the budget deficit gap without raising tax rates, it’s likely that the kinder, gentler side of the IRS will continue to give way to the rougher, tougher side that demands payment from taxpayers, no matter what the state of the economy is.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access