Hal's Mortgage Blog

 

IRS announces new program to help taxpayers pay back taxes and avoid tax liens.

How big is this problem? Well as you can imagine with tough economic times and decreasing value of your property, IRS lien filings have surged. In 1999, just 168,000 were filed, and in 2010 it surged to 1.1 million!

According to the IRS, new changes should decrease the number of tax liens filed (that’s the goal) and lessen the negative impact on taxpayer’s cash flow and credit reports.

The changes include:
For Consumers
• Increasing the general threshold for liens from $5,000 in unpaid taxes to $10,000.
• Making it easier for taxpayers to remove a tax lien from their credit report after paying a tax bill.
• Withdrawing liens, (removal from your credit report) in most cases, when a taxpayer enters into a Direct Debit Installment Agreement.
• Creating easier access to those payment agreements for struggling small businesses.
• Expanding a streamlined "Offer in Compromise" program to help more taxpayers settle their tax debts. (the quicker the lien is paid, the sooner the taxpayer and their family are experiencing economic recovery)

For Installment Agreements & Small Businesses
• Small business with $25,000 or less in unpaid taxes will have 24 months to pay on installment basis
• Tax lien is over $25,000, but is paid down to the $25,000 level, can qualify for installment payments.
• Installment payments can be set up as “direct debit” accounts

“Offers in Compromise” Option – An offer-in-compromise is an agreement between a taxpayer and the IRS that “settles” the tax liability for less than the full amount.
• Taxpayers annual income cannot exceed $100,000
• Tax liability of $50,000 or less

Many consumers think that if they pay off a collection or tax lien, their scores will go up. Unfortunately they don’t. Two negative things actually happen instead. The newly paid collection or tax lien will score like a brand new collection or tax lien (based on new paid date) and the seven year reporting clock starts over!

For this reason, if you are currently paying an IRS tax lien, you can now ask for it to be removed after making the last payment. The IRS is finally sympathetic in helping citizens maintain their credit scores.