IRS raises the debt threshold that triggers a property tax lien

property tax lien

The IRS has eased its rules on property tax liens, but the National Taxpayers Advocate says the agency hasn't gone far enough. Image: CC United States Department of Treasure/Wikemedia Commons

The IRS is easing its rules on property tax liens and giving delinquent taxpayers more options to pay their tax bills. The IRS is doubling the tax debt threshold that triggers liens on property and expanding access to offer-in-compromise agreements. The IRS will also remove tax liens on property if taxpayers set up automatic installment payments.

IRS calls off the dogs (sort of)

When Americans have an unpaid tax debt, the IRS issues a lien that establishes a legal claim to the delinquent taxpayer’s property. An IRS tax lien gives the agency priority over a taxpayer’s other creditors. Under new IRS rules, the threshold for filing a tax lien has been raised to $10,000 from $5,000. For back taxes of $25,000 or less, the IRS is also offering to withdraw a tax lien if the taxpayer establishes installment payments through direct-debit from a bank account. Withdrawing, instead of releasing a lien is important because when the IRS withdraws a lien, it can be removed from a taxpayer’s credit history. The previous practice of “releasing” the lien didn’t remove the tax debt from a credit report.

Other IRS lien changes

Other tax collection changes made by the IRS include making more taxpayers eligible for offer-in-compromise agreements, which allow taxpayers to pay less than the full amount owed on back taxes. Tax debts qualifying for offer-in-compromise agreements have been raised to $50,000 from $25,000 for both individuals and small businesses. The annual income threshold for offer-in-compromise agreements has also been raised from $50,000 to $100,000. The agency will also start making the effort to speak with taxpayers applying for a compromise, instead of frustrating them with confusing letters in the mail. The IRS will also allow people to continue making their car payments instead.

Your National Taxpayer Advocate

The IRS tax lien changes are a concession to National Taxpayer Advocate Nina Olson. For years, Olson has argued that the IRS needlessly harms people who are fighting to pay their debts. As Americans struggle in a bad economy, lien filings rose 14 percent in 2010. since 1999, tax liens have increased 550 percent. The IRS files liens automatically when tax debt hits the threshold with no evaluation of a taxpayer’s ability to pay. The IRS also lacks evidence that tax liens are worth the cost of enforcing them.



CBC MoneyWatch

Journal of Accountancy

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