Monday, February 28, 2011

IRS Eases Up On Tax Debtors

A couple of days ago the IRS announced five major changes to its tax debt resolution programs, including lien threshold increases, and new rules for IRS payment plans. These changes are a long time coming and will make a big difference for the thousands of people who owe the IRS.

From SF Gate.com:

    Lien threshold raised

    For starters, it generally won't file a tax lien against people who owe less than $10,000 in back taxes, twice the current threshold of $5,000. People who have a history of tax avoidance might not qualify. A tax lien gives the IRS a legal claim to a taxpayer's current and future property for the amount of an unpaid tax debt, but it is not filed until the IRS has made repeated attempts to collect from a taxpayer.

    "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    Tax liens withdrawn

    The IRS will also withdraw a lien once full payment of taxes is made if the taxpayer requests it. That means it will disappear from the taxpayer's credit report, according to Rod Griffin, director of education with the credit reporting firm Experian.

    Today, after a tax debt is paid, the IRS releases a lien. "At that point we no longer have a claim to any asset that the lien is attached to," Shulman said.

    Shulman said that "from our standpoint," a release and a withdrawal are the same thing, but some taxpayers have requested the change because they believe a withdrawal makes it easier to clean up their credit record and get a job.

Continue reading at SF Gate.com...