IRS Changes Mean More Options for Taxpayers Who Owe Back Taxes
By Brett Bissonnette
For individuals and businesses who owe back taxes, recent changes by the IRS provide more flexibility with installment agreements, and eliminate some of the hassles that go with dealing with collections personnel at the IRS. With tax filing season underway, now is a good time to review these changes.
Increased accessibility to streamlined installment agreements
According to IRS statistics, 90% of taxpayers with a balance due qualify for setting up a streamlined installment agreement online. That option is available for those individual taxpayers who have an outstanding balance of $50,000 or less (businesses qualify if they owe $25,000 or less). For taxpayers with balances of up to $25,000, installment agreements can typically be made with the IRS without the need for the taxpayer to provide a Collection Information Statement. And under a test of new streamlined processing of installment agreement guidelines (scheduled to run through September 30, 2017), producing a Collection Information Statement will now no longer be required of taxpayers with balances between $25,001 and $50,000. Additionally, taxpayers with balances in this tier will not be required to enroll in direct debit or payroll deduction, but such arrangements are still recommended by the IRS.
Also, for those taxpayers with balances between $25,001 and $50,000, the IRS will forego determining whether to file a National Federal Tax Lien (NFTL) on the taxpayer’s property if a direct debit or payroll deduction agreement is made. Taxpayers who do not agree to a direct debit or payroll deduction arrangement will not be disqualified, but will be the subject of an IRS NFTL determination.
Taxpayers with balances between $50,001 and $100,000 will see the most benefit from the new test of streamlined installment agreements. Prior to the new test, such taxpayers were ineligible for streamlined installment agreement consideration, and were required to disclose financial information in order to determine affordability. With the new test, those taxpayers will qualify as long as their proposed monthly payment is not less than the amount determined by dividing the tax balance (plus interest and penalties) by the lesser of 84 months, or the number of months remaining before the Collection Statute Expiration date. If the taxpayer agrees to either a direct debit or payroll deduction arrangement, then a Collection Information Statement will not be required, but the IRS will still make a determination as to whether to file a NFTL. For taxpayers with balances between $50,001 and $100,000, these new procedures make it easier to pay their IRS debt.
Don’t forget about Offers in Compromise
Many advertisements tout the ability to significantly reduce a taxpayer’s IRS debt through the Offer in Compromise (OIC) program. Examples of taxpayers who reduce hundreds of thousands of dollars of IRS debts for a few thousand dollars are commonplace. But the reality is that the OIC requires significant financial disclosure, and ultimately, most taxpayers cannot walk away from substantial tax debt.
Nonetheless, it is important to consider the OIC as an option when faced with a large IRS debt. A knowledgeable representative can quickly screen for the possibility of an OIC opportunity prior implementing an installment agreement, and can recommend a combination of tax collection defense strategies that could help provide taxpayers with freedom from their IRS tax debts.
If we can assist you or someone else with outstanding IRS tax debt, please contact us – we are more than happy to help. Contact us
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