By Rachel Ochman
Director Martin Scorsese may have, quite literally, taken a page from one of his own scripts. The IRS recently smacked a $2.85-million tax lien on the movie maker, who coincidentally gilded many a mob tax evader on the silver screen in movies like “Casino” and “Goodfellas.”
The lien reflects the IRS’s calculation of Scorsese’s back taxes owed, interest and penalties, and gives the agency a claim against his property in that amount. Mind you, this isn’t the first time Scorsese and the taxman didn’t see eye to eye. From 2002 to 2003, the IRS stuck the director with three liens tallying up to almost $1.9 million, and the state of New York obtained a $149,437 tax judgment against him the following year, according to the New York Post. Those debts are paid.
This time, argues Scorsese’s spokeswoman, the IRS made a mistake. She told the Post the agency didn’t do its homework, and filed the lien despite a payment agreement with which the director has been compliant. The allegation kicks up dust around an issue that Taxpayer Advocate Nina Olson recently targeted: the IRS’s lien-happy filing habits.
Lien filings have increased to 1.1 million in 2010 from 168,000 in 1999, according to Olson. And just in the first quarter of FY11, filings climbed an additional 28% compared to the same period last year. The IRS files a lien against a taxpayer with past-due debts. The lien gives the IRS legal claim to a delinquent taxpayer’s property as security or payment of a debt. The recession may have plumped that number, but Olson doesn’t think that tells the whole story.
She says automatic lien filings prevent the IRS from sufficiently analyzing a taxpayer’s financial circumstances. What’s more, Olson argues the agency is filing liens without considering whether the action will get more individuals to pay their taxes.
The IRS’s latest lien-relief program may resolve some of Olson’s qualms. The program, announced last month, represents the IRS’s effort to reduce the number of liens filed and lessen the blow to taxpayers’ credit ratings, among other goals, as WSJ reported. “We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start,” says IRS Commissioner Doug Shulman. The IRS says new rules could slash the number of liens by “tens of thousands,” but doesn’t get more specific.
Still, Olson expressed her concern that the IRS’s “improvements” don’t go far enough. One of the agency’s most egregious shortcomings, she says, is not calling taxpayers early in the process to avert snowballing interest and penalties. If the IRS reached out to taxpayers early, “when the debts are small and fresh,” debtors wouldn’t be lulled into interpreting silence as debt forgiveness, says Olson. By the time the IRS assigns a human being to handle the case, “these debts have become impossible to resolve.”
Readers, do you think human interaction in the IRS’s collection process comes too late? Is this to blame for the growing lien count?