The IRS just announced new policies and programs to help taxpayers pay back taxes. The IRS feels these changes will give people facing tough times an easier way to meet their tax obligations. This latest phase of the IRS Fresh Start program includes these major changes to its collection process and lien system:
Installment Agreements for Small Businesses
Small businesses with up to $25,000 unpaid balances can now participate in the Installment Agreement program. This is a dramatic increase from the prior $10,000 limit. Small businesses must enroll in a Direct Debit Installment Agreement in order to participate. A small business with an unpaid balance over $25,000 can participate in this program once they pay down their balance to $25,000 or less. The IRS feels this will help many small businesses free up cash flow to fund their operations, while making payment of their tax bill more manageable.
Offers in Compromise
An Offer in Compromise (OIC) is an agreement between the IRS and a taxpayer to settle tax liabilities for less than the full amount owed. Once again the IRS is expanding its OIC program to help a larger group of taxpayers. Some of the new changes are:
- Allowing taxpayers with annual incomes up to $100,000 to participate.
- Expanding the tax liability limit to $50,000 in order to participate. This is double the prior eligibility limit of $25,000.
- Revising the calculation of taxpayer’s future income:
- For OICs paid in five months or less, The IRS will only look at one year of future income instead of four years.
- For OICs paid in 6 to 24 months, The IRS will only look at two years of future income instead of five years.
- Expanding the Allowable Living Expense categories. The IRS uses a taxpayer’s Allowable Living Expenses to evaluate their OIC proposal. Taxpayers can now include expenses such as:
- Credit card payments and bank fees.
- Certain student loan payments.
- Payments for unpaid state & local taxes based on a percentage of total owed to all taxing authorities.
Increased Tax Lien Thresholds
A federal tax lien gives the IRS a legal claim against the taxpayer’s property for the amount of unpaid IRS debt (unpaid tax, penalties and interest). The IRS plans to significantly increase the dollar threshold for issuing tax liens to keep up with the pace of inflation.
Quicker Withdrawals of Tax Liens
Once full payment of taxes has been paid, the IRS will withdraw the liens at the taxpayer’s request. The IRS is streamlining its internal procedures to speed up the lien withdrawal process.
These new guidelines can help – IF they are handled correctly. It is more important than ever to let the right tax professional get your best tax settlement. Gary Kaplan, CPA has successfully represented clients before the IRS for over 15 years. Call Gary to discuss the best approach for your situation.
