The agency crackdown is "inflicting unnecessary harm" on hardworking Americans — even to the point of "torment," Olson said in her report sent to Congress on Wednesday.

Though she has flagged aggressive IRS liens in previous annual reports, the watchdog said the impact of the agency's actions has only been compounded by the extended economic downturn. The IRS filed 1.1 million liens in 2010, close to double the number it filed five years ago.

"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 said.

"Absent data that show liens make a meaningful contribution to revenue collection and especially in this economy, I find it unacceptable that the IRS continues to torment financially struggling taxpayers in this way."

"Tax collection requires a delicate balancing of the government's interest in collecting revenue and ensuring that all taxpayers pay their fair share of tax, on the one hand, and protecting financially struggling taxpayers from unnecessary harm, on the other,” Olson said. "Current IRS policies do very little balancing."

Each January, Olson releases a report detailing the most serious problems faced by taxpayers and offers legislative recommendations to Congress.

Atop her list this year is the need for comprehensive tax reform.

"There has been near-universal agreement for years that the tax code is broken and needs to be fixed," Olson said in a statement. "Yet no broad-based attempt to reform the tax code has been made."

One challenge, she said, is that "many taxpayers may nevertheless feel wedded to key aspects of the current system, undermining efforts at reform."

The IRS issued a statement defending its conduct and saying it recognizes many taxpayers are having financial problems.

"We have taken substantial steps to help struggling taxpayers facing collection problems," IRS spokesman Terry Lemons said. "This includes how we're using collection authorities given to us by Congress, including liens."