Tag Archives: tax lien

Is the IRS Finally Easing Up On Taxpayers? For Tax Liens, the Answer is Yes.

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The number of tax liens levied by the IRS has increased dramatically over the past several years. Lien filings increased from 168,000 in 1999 to 1.1 million in 2010, a gain of over 550 percent. While it can be argued that tax liens are a necessary part of collecting tax revenue and promoting tax compliance, there is also a concern that they place an excessive burden on taxpayers who are already financially strapped. In an attempt to relieve taxpayer stress in the current economic environment, the IRS has announced that it will initiate a series of new policies and programs to help taxpayers pay their back taxes and avoid getting a tax lien. These changes are outlined below.

  • The dollar threshold for issuing a tax lien is being lifted from $5000 to $10,000.
  • The IRS will agree to withdraw a tax lien when the taxpayer signs up for a direct debit installment agreement or switches from an existing installment agreement to a direct debit agreement. However, the lien will only be withdrawn after a probationary period to insure that the taxpayer’s direct debit agreement is in place and working as planned.
  • The IRS is promising to streamline the process for withdrawing a tax lien once the balance of the outstanding tax debt has been paid in full. As has previously been the case, the taxpayer will still have to submit a formal written request that the lien be removed once the tax debt is paid.
  • New Offer in Compromise guidelines have been instituted to make this tax settlement option available to a much larger group of taxpayers. The maximum tax debt ceiling allowed for qualification has been raised from $25,000 to $50,000 and taxpayers with annual incomes up to $100,000 can now qualify for an Offer in Compromise.
  • Small business with as much as $25,000 in tax debt will now be eligible to apply for an installment agreement where previously the maximum tax liability allowed to qualify for an installment option was $10,000.

These changes should address some of the concerns highlighted by national taxpayer advocate Nina E. Olsen in her annual reports to Congress. She has argued that tax lien filings have ruined the credit of millions of Americans and as a result, have made it even more difficult for them to pay the debt they owe the IRS. A tax lien is picked up by all three credit-rating agencies and can lower a credit score by as much as 100 points. Since credit reports are often used by employers, landlords, car dealerships, credit card issuers and mortgage lenders, a tax lien can effectively make someone unemployable and unable to obtain housing and transportation for the seven years it remains on the credit file after the tax debt is cleared and the tax lien is lifted. The recent changes to IRS policy outlined above should help to relieve taxpayers of some of these financial hardships. IRS Commissioner Doug Schulman has said that it is his aim “to promote tax compliance while minimizing the burden on taxpayers.” He further maintains that the IRS must continually revise and update its policies in order to fulfill this mission.

If you have an outstanding tax debt and are facing a possible tax lien or wage garnishment, we can help you select the tax settlement option that will best meet your needs. For more information about our services, visit us today at www.professionaltaxresolution.com. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

How We Reduced One Client’s Tax Debt from $40,000 to less than $1,000

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We were hired by the owner of a small mortgage company to resolve his tax debt. Our client had received a notice that his wages from a related company had been garnished by the state tax board and the federal government had issued an IRS notice of the intent to pursue a tax levy and tax lien. Both the state and the IRS were taking serious action and the client was understandably worried. At the time of the initial meeting the state tax board had already collected approximately $3,000 through wage garnishment which of course was a huge financial burden for his family.

What had gone wrong? The owner of the company admitted that he had actually not filed either his corporate or individual tax returns for five years. Why not? With the downturn in the economy, the company had lost money during that time and the owner figured it was not necessary to file his tax returns because he had made no profit.

Had he received any IRS Notices? Not only was the answer yes, he brought us a large stack of completely unopened IRS Notices and letters from the IRS. At Professional Tax Resolution Inc., we see this all too often. Clients paralyzed by fear have piles of unopened IRS Notices and Letters from the IRS. Why do you get so many letters? The reason is actually more logical than it may appear; the IRS generally has a 10 year statute of limitations for most tax debts so as an outstanding tax debt approaches the 10 year mark, the IRS collection efforts usually get more and more aggressive.

The first thing we did after our client hired us was determine which prior year tax returns had been not filed. We then did background research about beneficial tax codes so that when we filed his missed year returns, we could take all of the applicable benefits for our client. We know from our years of experience that the process of filing unfiled returns or correcting prior year returns is not only the right thing to do, it is far more productive than attempting to negotiate a settlement with the IRS for an amount less than the reported amount of the tax owed.

It turns out in the case of our mortgage company client, the IRS and state tax board had prepared estimated returns based on 1099 Forms provided to them by other taxpayers. When the IRS or State tax agency prepares an estimated or substitute return, they only include information that they have on file which traditionally only includes the income reported to them. The result is that all allowable expenses are generally not taken.

In this case we were able to contact the Internal Revenue Service and State Tax Board and obtain a 30 day collection hold to allow us the time we needed to file all of the outstanding returns. Using IRS transcripts, account information and our client’s company expense records we were able to actually prepare and file all of the outstanding individual and corporate tax returns. Once that work was completed and the returns were properly prepared, we ran a calculation and saw that the actual amount owed was now under $1,000! This was a huge reduction compared to the more than $40,000 the IRS and state tax boards indicated was owed just weeks before. We faxed the revised state tax returns to the state tax board and were able to stop the wage garnishments immediately and our client even receive a refund of the amounts the state had previously garnished!

We achieved great success in this case, reducing our client’s liability by over 97% because we correctly filed his outstanding returns. Had our client asked for advice years before, he might never had to face the burden of his large tax debt. Had he opened his IRS notices and called us for help earlier, he might have avoided a wage garnishment and tax lien. The lesson learned is simply that the worst course of action is no action at all.

For more information about how we can help you; call us at (949) 596-4143 and speak directly with a CPA today.