Irs Takes Steps

The IRS has announced changes that will help the taxpayers who have paid their previously owed taxes and who currently owe taxes. This announcement was made on February 24, 2011 and following these changes taxpayers who have paid their previously owed taxes will easily have the federal tax liens (FTLs) withdrawn (Logan, 2011). In addition, the offer-in-compromise (OIC) forms have been made easier to complete.

A FTL is a notice filed by the IRS following the failure of a taxpayer to pay the taxes they owe (Logan, 2011). Following this filing, the government attaches itself to the assets of the taxpayer thereby protecting its interests (Logan, 2011). However, this action decreases the credit score of a taxpayer and even after the lien is released, there is no much change in the credit score of the taxpayer (Logan, 2011). The IRS can withdraw a FTL in certain circumstances but this removes the lien only from the public record; it does not deal with the underlying statutory (Logan, 2011). Previously, withdrawal of liens was only done under the following circumstances: premature filing of the liens, failure to follow administrative procedures, when the taxpayers agreed to pay the taxes in installments, and if the withdrawal was in the best interest of U.S. and the taxpayer (Logan, 2011).

The IRS has now relaxed the circumstances under which a FTL can be withdrawn following the entry of a taxpayer into an installment agreement. Under the new Direct Debit Installment Agreement (DDIA) provisions, the taxpayers who are eligible for withdrawal include all business taxpayers who are out of business, individual taxpayers, and business taxpayers (income tax only) (Logan, 2011). For withdrawal to be done under this provision, the following conditions should be met: aggregate unpaid balance of assessments should not be above $25,000, total taxes owed should be paid in full before 60 months are over or before the expiry of the statute of collection limitation, the...