For some Americans, tax season is a season of dread. Instead of
looking forward to receiving a refund from the Internal Revenue Service
(IRS), these taxpayers owe the government money and are wondering
how they're going to pay it.
The IRS says it wants to lend a hand to these people, and has
outlined a series of new steps to help people get a fresh start
with their tax liabilities. The goal is to help individuals and
small businesses meet their tax obligations without adding
unnecessary burden to taxpayers.
Specifically, the IRS is announcing new policies and programs to
help taxpayers pay back taxes and avoid tax liens.
"We are making fundamental changes to our lien system and other
collection tools that will help taxpayers and give them a fresh
start," IRS Commissioner Doug Shulman said. "These steps are good
for people facing tough times, and they reflect a responsible
approach for the tax system."
The announcement centers on the IRS making significant
changes to its lien filing practices that will lessen the negative
impact on taxpayers. The changes include:
- Significantly increasing the dollar threshold when liens are
generally issued, resulting in fewer tax liens.
- Making it easier for taxpayers to obtain lien withdrawals after
paying a tax bill.
- Withdrawing liens in most cases where a taxpayer enters into a
Direct Debit Installment Agreement.
- Creating easier access to Installment Agreements for more
struggling small businesses.
- Expanding a streamlined Offer in Compromise program to cover
"These steps are in the best interest of both taxpayers and the
tax system," Shulman said. "People will have a better chance to
stay current on their taxes and keep their financial house in
order. We all benefit if that happens."
In 2008, the IRS announced lien relief for people trying to
refinance or sell a home. In 2009, the agency added new flexibility
for taxpayers facing payment or collection problems. And last year,
it held about 1,000 special open houses to help small businesses
and individuals resolve tax issues with the Agency.
This latest announcement comes after a review of collection
operations which Shulman launched last year, as well as input from
the Internal Revenue Service Advisory Council and the National
Tax lien thresholds
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,
liens are automatically filed at certain 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.
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.
"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."
Tax lien withdrawals
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.
Direct debit installment agreements and liens
The IRS is making other fundamental changes to liens in cases
where taxpayers enter into a Direct Debit Installment Agreement
(DDIA). For taxpayers with unpaid assessments of $25,000 or less,
the IRS will now allow lien withdrawals under several
- Lien withdrawals for taxpayers entering into a Direct Debit
- The IRS will withdraw a lien if a taxpayer on a regular
Installment Agreement converts to a Direct Debit Installment
- The IRS will also withdraw liens on existing Direct Debit
Installment greements upon taxpayer request.
- Liens will be withdrawn after a probationary period
demonstrating that direct debit payments will be honored.
In addition, this lowers user fees and saves the government
money from mailing monthly payment notices. Taxpayers can use the
Online Payment Agreement application on IRS.gov
to set-up with Direct Debit Installment Agreements.
"We are trying to minimize burden on taxpayers while collecting
the proper amount of tax," Shulman said. "We believe taking away
taxpayer burden makes sense when a taxpayer has taken the proactive
step of entering a direct debit agreement."
Installment agreements and small businesses
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
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
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.
"Small businesses are an important part of the nation's economy,
and the IRS should help them when we can," Shulman said. "By
expanding payment options, we can help small businesses pay their
tax bill while freeing up cash flow to keep funding their
Offers in compromise
The IRS said it 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
The IRS is taking steps to help taxpayers struggling to meet their tax obligations....