Thursday, February 24, 2011

IRS eases up on tax liens

The IRS is the biggest debt collection agency in the world, and the scariest for most people and businesses.  Instead of making threatening phone calls to your home, the IRS files tax liens. This official notice establishes priority rights for the IRS against other creditors, meaning that when the property against which the lien is filed is sold, Uncle Sam will get his owed money first.


IRS has decided that perhaps they are being a bit to harsh. Today they announced that it will be giving beleaguered  taxpayers who are having trouble coming up with the cash a bit of a break.
IRS Commissioner Doug Shulman announced today that his office is instituting new approaches to tax collection. These new policies and procedures, should help people who owe back taxes, especially lower-income taxpayers and small businesses.  Here are the new collection rules.

Increasing lien thresholds.
The IRS will "significantly increase" the dollar thresholds when liens are generally filed. Currently, liens are automatically filed against people with $ 5000 in taxes overdue. This threshold has been in place since the 1980's. In keeping with these fun times, IRS has raised that to $ 10,000! Awesome!


"Raising the lien threshold keeps pace with inflation and makes sense for the tax system," Shulman said. "These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government."  We would not want any financial risk to the government, now would we?


Withdrawing liens for direct payment plans.
Lien withdrawals will be even easier for taxpayers who owe $25,000 or less and agree to pay off the debt via a direct debit installment plan. Set up such a plan, in which the regular payments are made directly to the IRS, rather than you writing a check each month, and the lien will be released.
If you already have such a debit payment plan, just ask the IRS to release the lien. And if your IRS installment plan is the traditional type in that you're still writing checks, just change it to direct debit and the lien will be withdrawn.  A withdrawn lien is a stronger deal than a lien release.  It is helpful when your credit file is updated. It should improve scores quickly.

Making installment plans more accessible.
The IRS will raise the dollar limit of its payment program to tax debts of $25,000 or less to allow more small businesses to participate. Currently, only small businesses with less than $10,000 in liabilities can get tax installment payment plans. Small businesses will have to enroll in a Direct Debit Installment Agreement and will have two years to pay off the debt.


Expanding the Offer in Compromise program.
The IRS is also expanding a new streamlined Offer in Compromise , or OIC, program to cover a larger group of struggling taxpayers. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. Taxpayers with annual incomes up to $100,000 now can participate. In addition, the unpaid tax bill amount for eligibility has been doubled, from $25,000 or less to $50,000.


Commissioner Shulman said the changes will help people who are struggling in a weak economy get current on their tax bills. "These steps are in the best interest of both taxpayers and the tax system," he said. I applaud IRS for finally realizing that people need to eat, have a roof over their head, and pay their monthly bills to survive. Recognizing the difficulty taxpayers are facing is a step in the right direction. Now we just need to abolish the who department. Now THAT would be a big step.

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