IRS policy toward back taxes and tax liens in place for fiscal year 2011 may help lighten the tax load for many Americans. Plans to review the program success next year will determine whether or not these changes remain in effect.
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IRS Softens Rules For Federal Tax Liens

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IRS policy toward back taxes and tax liens in place for fiscal year 2011 may help lighten the tax load for many Americans. Plans to review the program success next year will determine whether or not these changes remain in effect.

INCREASED LIEN THRESHOLDS

A federal tax lien gives the IRS legal rights to a taxpayer's property for the amount of unpaid tax owed. The indebted taxpayer must file a Notice of Federal Tax Lien to claim federal government priority rights over your belongings, before other creditors.

An IRS proposed higher dollar amount owed in unpaid taxes in order for tax liens to be placed on property holdings is designed to keep pace with inflation. It will also benefit both taxpayers and the tax system, helping people stay current with their tax information and leading to smart money management, and allowing the tax system less lien management.

Military service members should beware that liens and back taxes which may affect your credit rating and your military status.

DIRECT DEBIT FOR LIEN PAYMENTS

The IRS is also opening Direct Debit Installment Agreement (DDIA) to eligible taxpayers, to encourage on time lien debt payments. Late payments also affect your credit rating and should be avoided.

Direct Debit Installment Agreement may be used after a trial period that demonstrates that direct debit payments will be honored. Eligible taxpayers can use the Online Payment Agreement application on IRS.gov to set-up DDIA.

OFFER IN COMPROMISE EXPANDED

An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the full amount owed. Usually Offer in Compromise (OIC) is not accepted if the liability can be paid in full, based on the taxpayer's income and assets.

The IRS is also expanding a new streamlined OIC program allowing taxpayers with annual incomes up to $100,000 to participate. Participants must also have tax liability under $50,000, raised from the previous limit of $25,000 or less.

Of course the best plan is to pay your taxes, on time and in full, and avoid liens and payment agreements. If you need help paying your military taxes, ask your Commanding Officer for the free tax planning and tax payment support available on base.



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