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In its latest effort to help struggling taxpayers, the Internal Revenue Service announced a series of new steps to help people get a fresh start with their tax liabilities.
The IRS goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers.
With IRS initiative the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.
IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers.
The new tax changes include:
a. Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens,
b. Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill,
c. Withdrawing federal tax liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement,
d. Creating easier access to Installment Agreements for more struggling small businesses,
e. Expanding a streamlined Offer in Compromise program to cover more taxpayers.
Both the taxpayer and the IRS benefits from this. This is another in a series of steps to help struggling taxpayers.
In 2008, the IRS announced lien relief for people trying to refinance or sell a home. In 2009, the IRS added new flexibility for taxpayers facing payment or collection problems. And last year, the IRS held about 1,000 special open houses to help small businesses and individuals resolve tax issues with the Agency.
The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised.
Currently, federal tax liens are automatically filed at $10,000 dollar levels for people with past-due balances.
The IRS plans to review the results and impact of the lien threshold change in about a year. IRS should not be filing tax liens unless the tax debt is over $20,000. The filing of a federal tax lien actually cripples taxpayers and their future ability to borrow money. With the IRS filing these tax liens taxpayers are finding it absolutely impossible to pay off their debt because of their credit reporting scores.
The federal tax lien protects the government’s interest it has a completely adverse effect on the taxpayer in many cases taxpayers will never recover from the filing of the federal tax lien.
A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt.
Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. Usually the government is not the only creditor to whom the taxpayer owes money.
A lien informs the public that the U.S. government has a claim against all property, and any rights to property, of the taxpayer. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.
The IRS will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.
Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.
In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.
The IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement . For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:
Tax Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.
The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
The IRS will also withdraw liens on existing Direct Debit Installment agreements upon taxpayer request.
Federal Tax Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.
The IRS will also make streamlined Installment Agreements available to more small businesses. The payment program will raise the dollar limit to allow additional small businesses to participate.
Small businesses with $25,000 or less in unpaid tax can participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses will have 24 months to pay.
The streamlined Installment Agreements will be available for small businesses that file either as an individual or as a business. Small businesses with an unpaid assessment balance greater than $25,000 would qualify for the streamlined Installment Agreement if they pay down the balance to $25,000 or less.
Small businesses will need to enroll in a Direct Debit Installment Agreement to participate.
The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.
This streamlined OIC is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.
OICs are subject to acceptance based on legal requirements. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.
Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.
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