IRS Launches a Lenient Lien Program for Small Businesses

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If you have small business clients who are struggling with back taxes and/or tax liens, you can give them some good news. The IRS is offering help for both individuals and small businesses that are struggling to “meet their tax obligations, without adding unnecessary burden to [the] taxpayers.”

The new program, announced in late February, includes a number of features:

  1. Higher threshold at which tax liens will be issued—The IRS will index for inflation the threshold for filing a tax lien. “These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government,” according to IRS Commissioner Doug Shulman.
  2. Simplified procedures for removing tax liens after a tax bill is paid—Withdrawal of a tax lien will be automatic when a taxpayer’s tax debt has been satisfied in full. Also, the IRS will now allow collection personnel to remove tax liens, reducing the administrative complexity of removing a lien.
  3. Withdrawing tax liens when a taxpayer enters into a Direct Debit Installment Agreement—The IRS will withdraw tax liens for many taxpayers who have no more than $25,000 in unpaid assessments and who participate in a Direct Debit Installment Agreement. “Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored,” according to the IRS release announcing the program.
  4. Easing access to Installment Agreements for small businesses—Direct Deposit Installment Agreements will be made available to more small businesses. Small businesses with no more than $25,000 in unpaid taxes will now be permitted to enter into installment agreements—up from $10,000 under the currently applicable program. The installment agreements will give small businesses up to 24 months to pay.
  5. Expanded Offer in Compromise program—Taxpayers with up to $100,000 in annual income will be eligible for the “new streamlined Offer in Compromise” program. The IRS is doubling the current tax liability limit for participation in the program to $50,000. “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.” Offers in compromise are permitted only when the IRS believes that the taxpayer cannot be paid in full or via a payment agreement.

Tax liens can strangle a small business by cutting off their ability to post collateral for essential loans. If you have clients suffering under the weight of a lien, alerting them to the new program could give them some much needed relief and provide you with an opportunity to get them into your office for some face time.

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