The IRS has had a policy for many years that if a taxpayer cannot pay their tax bill, they would file a federal tax lien to protect the government’s interest.

In many cases the IRS was aware the  lien would never be paid off and that they would hurt the taxpayers credit and their ability to secure loans in the future.

Since a federal tax lien is good for a ten year period of time, what the IRS does by filing it is totally cripple the taxpayer’s ability to borrow money in the future because their credit was ruined from the filing.

For years, Nina Olsen the National Taxpayers Advocate, has been highlighting this issue in her National report to Congress. Here is her latest finding:

” Over the past seven years, the IRS has filed more than five million tax liens. The report says that despite the high unemployment rate and the unusually large number of Americans who are experiencing financial difficulties, the IRS is continuing to ramp up the number of tax liens it files each year. The 1.1 million liens filed in FY 2010 compare with 168,000 in FY 1999, an increase of 550 percent.  Notably, over the same period that lien filings have increased by 550 percent, annual revenue collected by the IRS’s Collection function on an inflation-adjusted basis has remained flat. 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,”

Olson closed her remarks saying that this practice is “unacceptable.”

It is possible to file a Collection Due Process Proceeding.  At those hearings the taxpayer may be successful in requesting from the IRS the non-filing of the Federal Tax Liens because it would defeat the purpose of  being able to pay the IRS back in the future.