IRS announces changes for tax liens

Posted: Monday, February 28, 2011

As Tax Day looms closer, the Internal Revenue Service has just announced new steps to help people get caught up with their tax obligations. These steps are specifically geared toward helping with back taxes and avoiding 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 in a release. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.”

“We want to provide a way for taxpayers to be able to meet their tax obligations, and to make that as easy and efficient as possible, we want to remove any obstacles or burdens to that,” said David Tucker of IRS field media relations.

One change is the increase of dollar thresholds when liens are generally filed. This is in keeping with inflationary changes since the number was last revised. Liens are currently filed at certain dollar levels automatically for people with past-due balances.

The IRS plans to review the results and impact of the lien threshold change in about a year.

“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.”

Liens will also now be withdrawn if requested once full tax payments are made.

Another lien changes to lien applies to 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 if they enter or are currently under such agreements, or if the convert from a regular installment agreement.

Liens will be withdrawn after a probationary period demonstrating direct debit payments will be honored.

The IRS is also making streamlined installment agreements available to small businesses with $25,000 or less in unpaid taxes. Currently, only businesses with less than $10,000 in liabilities may participate.

Participating businesses must enroll in a DDIA to participate and will have 24 months to pay.

“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 operations.”

The other step is to expand a new streamlined offer-in-compromise program to cover those with annual incomes up to $100,000. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.

These steps follow a review of collection operations Shulman launched last year, plus input from the IRS Advisory Council and the National Taxpayer Advocate.

“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.”

• Contact reporter Jonathan Grass at 523-2276 or

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