IRS STREAMLINED SETTLEMENT
OFFER in COMPROMISE GUIDELINES
“We are making fundamental changes to our tax lien system and other collection tools that will help taxpayers and give them a fresh start,” IRS Commissioner Doug Shulman said. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.”
As stated above, many of the new IRS policies focus on tax liens and their effects on taxpayers.
• Raising the threshold amount when a Federal tax lien is generally issued. This will result in fewer tax liens being filed.
• Simplifying the process for having a federal tax lien removed, once your underlying tax debt is paid.
• Removing a tax lien for most instances when a taxpayer enters into an Installment Agreement that is paid by direct debit.
• Expanding the Installment Plan options for small businesses with tax arrears.
• Streamlining the Offer in Compromise process.
Federal Tax Lien Thresholds
The IRS will significantly increase the dollar thresholds when a tax lien is generally filed.
A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt. Filing a Notice of Federal Tax Lien is necessary to establish priority rights against certain other creditors. More than likely, the IRS is not the only creditor to whom a taxpayer owes money.
A Federal tax lien is a public record. It informs the general public that the IRS has a claim against all of your property, and any rights to your property. This includes property owned at the time the notice of lien is filed and any acquired thereafter. A lien affects a taxpayer’s credit rating, so it is critical to arrange the payment of taxes as quickly as possible.
Federal Tax Lien Withdrawals
The IRS will also modify procedures, making it easier for taxpayers to obtain lien withdrawals.
Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. In order to speed the withdrawal process, the IRS will also streamline its internal procedures to allow collection personnel to withdraw the liens.
Direct Debit -- IRS Installment Agreements and Tax Liens
It used to be the case that once a Federal tax lien was filed, it was nearly impossible to get that tax lien removed before the taxpayer paid off the tax debt in full. Soon, for taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow a tax lien withdrawal under several scenarios:
•Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.
•The IRS will withdraw a lien if a taxpayer who is on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
•The IRS will also withdraw liens on existing with Installment Agreements with a Direct Debit upon the taxpayer’s request.
Federal Tax Liens will be withdrawn after a probationary period, provided the taxpayer demonstrates that direct debit payments will be honored. The specific length of the probationary period has not been published.
IRS Installment Agreements and Small Businesses
The IRS will also make streamlined Installment Agreements available to more small businesses. Streamlined Installment Agreements are long term payment plans that can be set up easily, without the need to fill out detailed financial disclosures. The payment program will raise the dollar limit, allowing additional small businesses to participate.
Currently, installment plans for small businesses are restricted to tax debts that are no larger than $10,000. The new rules will allow installment agreements that last up to two years for small businesses with $25,000 or less in unpaid taxes. In order to participate, small businesses will need to enroll in a Direct Debit Installment Agreement.
TAKE ADVANTAGE OF THE IRS WHILE YOU CAN
Streamline Offer in Compromise
The IRS is also expanding the new "streamline" Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers.
This new streamline IRS settlement through the Offer in Compromise program (OIC) is being expanded to allow taxpayers with annual incomes up to $100,000 to participate. In addition, participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.
The IRS is not altering the eligibility requirements for achieving a tax settlement through the Offer in Compromise (OIC) program. An Offer in Compromise are still subject to acceptance based on IRS requirements and are based on such items as your income, your assets, your allowable expenses, your age, future income potential and the Statute of Limitations regarding your tax liablity. There are more factors involved in the formula for an Offer in Compromise.
The new changes aim to move more Offer in Compromise (OIC) cases through the system, clearing out a backlog that has been growing over the past few years of economic downturn. A faster resolution on your Offer in Compromise case will help taxpayers put their IRS problems behind them and get a fresh start.
DO IT RIGHT
|IRS Tax Relief Help|
IT'S ALL ABOUT PROCEDURE
The IRS has not suddenly become a "big lap dog". The IRS remains the most powerful collection agency in the world with enormous powers. The IRS is not going to tell you were you went wrong with your paperwork. The IRS is not going to haggle with you regarding your settlement. There is no "back and forth" negotiation. There is paperwork that must be completed correctly without errors. There are deadlines that must be met. There are financial formulas that must have your settlement be "right on the money."
If you make an error, the IRS will reject your Offer in Compromise as un-processable. You will not be given an explanation. You will have to start all over again while being vulnerable to more collection activity.
DO IT RIGHT THE FIRST TIME
In most cases, the IRS will not accept an Offer in Compromise or OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP).
REASONABLE COLLECTION POTENTIAL
The Reasonable Collection Potential (RCP)is the formula by which the IRS measures your ability to pay your tax liability and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The Reasonable Collection Potential (RCP) also includes anticipated future income, less certain amounts allowed for basic living expenses. Other factors, such as your age, your occupation and the Statute of Limitations, are considered when coming up with your Reasonable Collection Potential.
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