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Fresh Start IRS
The IRS in its latest mandate to help struggling taxpayers, has implemented 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 implemented new policies and programs to help taxpayers pay back taxes and avoid tax liens that we can further explain and help implement.
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 more taxpayers.
- - 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 will also modify procedures that will make it easier for taxpayers to obtain lien withdrawals.
- - The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
- - The IRS will also withdraw liens on existing Direct Debit Installment agreements upon taxpayer request.
- - 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 to pay.
- - 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.
- - The IRS is also expanding a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.
Additionally, For taxpayers who have suffered a FICO credit report hit of up to 200 points due to a federal tax lien, the IRS may be able to help. In the past, even after tax debts were paid, a federal lien would still show on a taxpayer’s credit report and cause damage to the taxpayers credit score. Under the recently enacted Fresh Start Program, the IRS now allows many taxpayers the ability to completely remove the lien from their credit report, This new program not only allows taxpayers to remove the lien and drastically improve their credit score but it also creates easier ways to repay tax debts owed to the IRS.
“For many taxpayers, the ability to remove a tax lien from a credit report may be the difference between qualifying for a loan or not”. This new program is great news for taxpayers since consumer’s credit reports can now be quickly repaired. In the past, taxpayers could pay the full amount of tax owed and mark the lien as “released” on the credit report but still had to wait seven years after the date the lien was satisfied for it to be removed from their credit report. Under the new guidelines, liens can be removed once full payment is made or in many cases once the taxpayer enters into a direct debit installment agreement with the IRS. Taxpayers who are already in a monthly payment agreement can easily convert to a direct debit installment agreement and request removal of the lien.
Once the taxpayer is on a direct debit agreement, they must make three consecutive monthly payments before the IRS will consider lien removal. The taxpayer must have filed all required tax returns for the last three years and must not have defaulted on a previous IRS installment agreement. Additionally, to qualify for this program, the total balance owed to the IRS including tax, penalties and interest must be less than $25,000.
Getting the IRS to remove the lien is just the first step in a taxpayer improving their credit. While the IRS may withdraw the lien and mark it satisfied with the court where the lien was filed, it is the taxpayer’s responsibility to notify the credit reporting company once the lien withdrawal has occurred. In most cases, neither the IRS nor the court will notify the credit agencies when a lien has been withdrawn. As a result, the time to get the lien withdrawn can take 90 days or more.
The IRS has also expanded its existing installment agreement options to allow more taxpayers to participate. The “Streamlined” Installment Agreement allows taxpayers to pay the tax owed in equal monthly payments over a set amount of time. Historically, this type of installment agreement allowed taxpayers whose tax liability was less than $25,000 to make monthly payments over five years. Under the new program the IRS increased the limit to $50,000 and now allows taxpayers to pay the balance owed over six years as long as the taxpayer agrees to make direct debit payments and the statute of limitation for collection exceeds six years. Other changes under the Fresh Start program includes the IRS lessening the impact of its lien practices by increasing the threshold for filing a lien against most taxpayers from $5,000 to $10,000.
Whether a taxpayer has satisfied their lien, is already in an installment agreement or has not attempted to establish a payment plan with the IRS, the best course of action is to contact us at (855) 275-0873 to find out whether they can take advantage of this new program and improve your credit.
We can help get you current with your tax return filing obligations and then analyze your situation to determine the best course of action and minimize the chance of any criminal investigation. For many taxpayers, this typically leads to an IRS Offer in Compromise.
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