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IRS Makes Some Changes to Simplify Paying Tax Debts

The IRS has announced plans to try to help taxpayers who have tax liabilities that they are struggling to pay off. The goal is to try to help people and businesses to meet their tax obligations, paying back taxes due and avoiding liens.

The IRS says it will make serious changes to its tax lien procedures and other means of collecting taxes. Since so many people are facing tough economic conditions, the Service feels that helping people get a fresh start is the best way to approach tax collection at this time.

Changes to the tax lien practices include:

  • Increasing the threshold amount of tax due for a lien to be issued

Often there are other creditors that a taxpayer owes money to, so a lien informs everyone that the government has a claim to piece of property, a frequent example being a bank account. Liens affect taxpayers' credit ratings, so paying the tax and removing the lien quickly are essential.

  • Simplifying the process for obtaining a lien withdrawal after paying a tax bill

The IRS says that now liens will be removed once the tax has been paid. To simplify the process, collection personnel will be authorized to withdraw liens.

  • Cancelling liens when a taxpayer agrees to a Direct Debit Installment Agreement

Liens will be withdrawn if a taxpayer agrees to a DDIA, or if they are already on one and the taxpayer requests the lien withdrawal. All withdrawals in exchange for a DDIA are probationary. The liens will be restored if the payments are not made.

  • Simplifying the process for small businesses to enter Installment Agreements

Dollar limits will be raised for small business participation in Installment Agreements. Business with $25,000 or less in liabilities can participate. Up to now, the maximum was $10,000 in liabilities. Businesses will have twenty-four months to pay their tax debt.

  • Streamlining the Offer in Compromise program to cover more taxpayers

Under the new system, taxpayers with incomes up to $100,000 can participate in the OIC program. Tax liabilities of $50,000 or less qualify, up from the former $25,000 or less.

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. The IRS looks closely at a taxpayer's ability to pay. If they believe the full tax debt can be paid, an offer in compromise will not be accepted.

Source: irs.gov "IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process" 2/24/2011

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