IRS revamps lien procedures to help struggling taxpayers.

• Author: Chang, Anne

Since 2008, many taxpayers have been facing unusual financial difficulties due to the economic downturn. As a corollary, some individuals and families have been unable to keep current on their tax obligations. Recognizing the resulting stress on the national economy and the impact on people, the IRS has taken actions to reduce struggling taxpayers' tax-related burdens while still enforcing the tax law. The IRS said it believed the programs and polices would also benefit the government.

In 2008, the IRS announced an expedited process to help financially distressed homeowners avoid having a federal tax lien block refinancing a mortgage or selling a home (IR-200S-141). In February 2011, the IRS implemented new measures to further ease the tax and other financial burdens on distressed taxpayers by helping them pay back taxes and avoid tax liens (IR-2011-20).

The IRS revised tax hen filing practices and provisions to:

* Increase the dollar Threshold at which liens are generally issued;

* Make it easier for taxpayers to obtain lien withdrawals after paying a tax bill;

* Withdraw liens when taxpayers enter into a direct debit installment agreement;

* Make installment agreements available to more small businesses; and

* Expand a streamlined offer in compromise program to cover more taxpayers.

Tax Lien Thresholds

In the past, the IRS would issue a lien for unpaid taxes totaling more than $5,000. However, under the new procedures the tax lien filing threshold has been increased to $10,000. The new threshold reflects inflationary changes since the last revision and will reduce the number of tax liens the IRS issues. According to the IRS, tens of thousands of people stand to benefit from the revised procedure.

However, the IRS has advised that it will not apply the new procedure retroactively, and previously filed liens will continue to be processed. In addition, the IRS said it will continue to file liens on amounts less than $10,000 when circumstances warrant. The IRS will review the results and impact of the lien threshold change within a year.

Tax Lien Withdrawals

Under certain circumstances, a taxpayer may request that a tax lien be withdrawn by filing a written application. The IRS considers withdrawals appropriate where:

* The taxpayer has made full payment of all outstanding taxes due;

* The hen was filed in error;

* The taxpayer entered into an installment agreement; or

* The IRS believes withdrawal will facilitate the tax liability's...