IRS Changes Can Help Business Struggling With Taxes

By Maria Valdez Haubrich

Is your business struggling with unpaid taxes? You’re not alone, and since the recession began, the IRS has taken steps to help individuals and businesses that owe taxes get a fresh start with their tax liabilities.

This year the Fresh Start program made several changes to IRS collection practices to help taxpayers, including:

1. Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens. A federal tax lien gives the IRS a legal claim to a taxpayer’s property for the amount of an unpaid tax debt.This includes property owned at the time the notice of lien is filed as well as any property purchased after that. Since a lien can hurt a taxpayer or business’s credit rating, it’s crucial to pay taxes as quickly as possible to have the lien removed.

Currently, liens are automatically filed at certain dollar levels for people with past-due balances. The IRS will significantly increase the dollar thresholds at which liens are generally filed. The new dollar amount is tied to inflationary changes since the number was last revised. The IRS plans to review the results of the lien threshold change early next year.

2. Making it easier for taxpayers to have liens withdrawn after paying a tax bill. Liens will now be withdrawn once taxes are paid in full, if the taxpayer requests it. The IRS has also streamlined its internal procedures to speed the lien withdrawal process, and will withdraw liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

3. Creating easier access to Installment Agreements for more struggling small businesses. The IRS has made streamlined Installment Agreements available to more small businesses by raising the dollar limit so that additional small businesses can participate. Formerly, only small businesses with under $10,000 in liabilities could participate; the new program raises the limit so small businesses with $25,000 or less in unpaid tax can participate. Small businesses now have 24 months to pay.

In addition, streamlined Installment Agreements are now available for small businesses that file either as an individual or as a business. Small businesses with unpaid taxes of more than $25,000 will qualify for the streamlined Installment Agreement once they reduce the balance to $25,000 or less. Small businesses must enroll in a Direct Debit Installment Agreement to participate.

4. Expanding the streamlined Offer in Compromise program to cover more taxpayers. An OIC is an agreement between a taxpayer and the IRS to settle the taxpayer’s tax liabilities for less than the full amount owed. In most cases, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The OIC program has been expanded to allow taxpayers with annual incomes up to $100,000 to participate. Participants must have tax liability of less than $50,000 (an increase from the former limit of $25,000 or less.)

Will any of these changes help your business? You can find out more about the changes and get necessary forms at the IRS website.

DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

Image by Flickr user MoneyBlogNewz (Creative Commons)

This entry was posted on Thursday, June 30th, 2011 at 6:00 am and is filed under Accounting and Taxes, Compliance, Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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