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The devastating impact of tax liens

Here's a disturbing number: The Internal Revenue Service filed liens against 1.1 million taxpayers in fiscal 2010. That's up from 168,000 in 1999.

In her latest column, Washington Post personal finance writer Michele Singletary quotes from the annual report to Congress by Nina E. Olson, the national taxpayer advocate, on the devastating impact tax liens have on taxpayers.

"Increasingly, employers, mortgage lenders, landlords, car dealerships, auto insurance companies and credit-card issuers utilize credit reports, so a tax lien has the potential to render someone unemployable, unable to obtain housing (owned or rented) and unable to obtain car insurance or a credit card, at least at reasonable rates, for many years into the future," Olson wrote in her most recent report.

A tax lien can drop your credit score by about 100 points.

Singetary's column is about how it now appears the IRS has finally listened. The IRS will focus more on programs to help taxpayers pay their back taxes and avoid getting a lien (and making it easier to get a lien removed.

Singletary runs through the changes planned by the IRS. While hardly revolutionary, it's definitely an improvement if the government agency truly follows through with the changes.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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