In the early 1990s, IRS
enforcement activities were fairly aggressive. In
several well-publicized cases, individual
taxpayers lost their homes and livelihoods to the
IRS because of unpaid taxes. As a result, public
sentiment turned against the agency, and
congressional hearings were held to address the
problem. Congress responded by passing the IRS
Restructuring and Reform Act of 1998.
the act’s aftermath, IRS enforcement strategies
changed. Seizures decreased dramatically and
became less intrusive. Enforcement activities
became less visible. The apparent decrease in IRS
enforcement activities is not all good news for
taxpayers: The use of liens and levies has
increased; document-matching activities are up;
average dollar amounts of penalties have grown;
and prison sentences for tax-related matters have
The most significant changes to IRS
enforcement have occurred in the collection
programs. IRS data show that seizures nosedived
after passage of the IRS Reform Act, dropping from
10,000 in 1997 to fewer than 600 in 2006.
Seizures are confrontational, visible and very
disruptive to taxpayers, their families, and their
neighbors. Instead of seizures, the IRS has
changed its collection focus to liens and levies,
which do not lead to direct confrontation. Federal
tax liens increased from 168,000 in 1999 to more
than 629,000 in 2006. Other than placing a blemish
in the public records, the process of recording
the lien is invisible to the taxpayer’s family and
neighbors. If the property is later sold, the IRS
lien will be satisfied, with interest, from the
proceeds of the sale.
from 220,000 in 2000 to more than 3.7 million in
2006. Levies, such as wage garnishments, are
generally made against persons or entities holding
property for the taxpayer’s benefit. Much like
liens, levies achieve the same outcome as seizures
(that is, collection) but are much less visible
and do not require a face-to-face confrontation
with the taxpayer.
According to the IRS, the enforcement
changes seem to have been successful. In its 2007
report, Reducing the Federal Tax Gap ,
the Service indicated that its enforcement
activities have produced a steady climb in
revenues since 2001. Enforcement revenues grew 44%
from 2001 to 2006. Liens and levies are a driving
force behind the increase.
In an effort to
increase voluntary compliance, the IRS intends to
expand its enforcement activities in coming years.
For fiscal year 2008, the Service requested an
additional $410 million for new enforcement
initiatives. Part of the money will be used for
“increasing front-line enforcement resources,”
which will probably translate into more audits.
The IRS notes that examinations of individual
income tax returns increased 77% from 2001 to
2006. During the most recent period (2006), the
IRS examined approximately 1.3 million income tax
returns. However, it does not appear that
front-line enforcement activities will translate
into more face-to-face audits or an increase in
seizures. Rather, correspondence audits,
penalties, liens and levies will likely increase.
For a detailed discussion of the issues in
this area, see “IRS Enforcement Activities: Past,
Present, and Future,” by Raymond L. Placid, Esq.,
CPA, H. Wayne Cecil, CPA, Ph.D., and Carl Pacini,
Esq., CPA, Ph.D., in the July 2008 issue of
The Tax Adviser.
M. Nevius, editor-in-chief
The Tax Adviser
Also look for
articles on the following topics in the July 2008
issue of The Tax Adviser :
An overview of charitable
A look at structuring legal fees.
A report on the Economic Stimulus