Unpaid federal tax debts total US$373 B

Individuals and businesses owed the federal government a combined total of US$373 billion in unpaid tax debts.

Of this total, some US$258 billion are from individuals and US$115 billion from businesses, says a 2011 report from the Government Accountability Office (GAO).

The GAO reported that some of these tax debts, ranging from US$5,000 to US$25,000 per debtor,  were in the collection process. The Internal Revenue Service (IRS)already notified the tax debtors but some of them resorted to dispute, while others requested for installment agreements, both totalling at least $60 billion. Sadly, some US$110 billion of the total was classified by the IRS as uncollectable.

"IRS files tax liens on some tax debts and these liens are public records that credit bureaus routinely pick up and add to their data. Over half of the total amount owed was subject to liens, cutting across the above categories," GAO said.

According to GAO, these tax liens and debt data could be picked by credit bureaus, which could somehow affect their credit history information, employment and housing, especially if the data provided were found to be inaccurate.

It was, therefore, suggested that data accuracy, alternatives and expected benefits are important factors that Congress might consider in reporting tax debts to credit bureaus. Another important consideration would be the expected benefits of direct tax debt reporting, adding that this could yield benefits such as increased revenue collection or reduced tax debt inventory.

However, the National Taxpayer Advocate cautioned that such reporting could cause some taxpayers to choose not to file or file inaccurately if they know they owe money to IRS.

However, IRS is not allowed to directly report tax debts to credit bureaus because long-standing federal law protects the privacy of taxpayers' information. IRS is only authorized to disclose personally identifiable information reported to or developed by IRS in limited circumstances as specified by law. IRS is, however, allowed to file tax liens on some tax debts, and such liens are public records that are picked up by credit bureaus and included in the credit historyinformation they compile, GAO reported.