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National Taxpayer Advocate tells Congress too many tax-liens

Consumer debt can take many forms. Credit card debt, medical bills and secured debt, among others, can combine to place consumers in financial distress. Cincinnati bankruptcy attorneys know that in the tough economy, rising debt loads, high unemployment, divorce and home loans that exceed market value can strain the budgets of many Ohio residents.

The National Taxpayer Advocate of the Internal Revenue Service recently issued her annual report to Congress. She says that the increasing use of "hard-core enforcement actions" is inflicting unnecessary harms on distressed tax payers. The Advocate, Nina E. Olson, says the use of tax liens is troublesome for many Americans.

Generally, back taxes are not dischargeable in a bankruptcy proceeding. In some cases, back taxes can be reduced or brought current during a chapter 13 bankruptcy as a priority debt. But for consumers, a tax lien can still wreak troubles.

The Advocate says that the IRS filed 1.1 million liens last year. That was a 14 percent jump over the number of liens filed in 2009. In the past decade, the IRS has increased the number of liens it files by an astounding 550 percent, according to Olson.

What troubles Olson is that the liens appear to only harm distressed homeowners in these tough economic times. The 550 percent increase in tax lean filings coincides with flat revenues in the collections unit over the same time period.

The advocate says that reform is indicated. According to the advocate, a tax lien really can make getting out of debt a never-ending challenge. A lien is reported to credit agencies; the taxpayer's name is added to taxpayer credit reports. Once filed, a tax lien stays on the taxpayer's record for seven years from the date it's resolved.

Source: IRS, "National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, Collection issues. And Implementation of Health Care Reform," 5 Jan 2011

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