IRS to give Tax Lien holders a Break!

Up until now a tax lien, paid or unpaid could haunt your credit report for a long time. Depending on what state you live in, a paid tax lien could stay on your report for 7-10 years and an unpaid lien could stay on indefinitely.  The IRS announced in February they’re about to give those with tax liabilities a break.

The first action the IRS has taken is raising the lien threshold from $5,000-$10,000.  According to IRS Commissioner Doug Shultman, “Raising the lien threshold keeps pace with inflation and makes sense for the tax system.  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”.

Additionally the IRS can “withdraw” a lien once the taxpayer pays the lien in full and the taxpayer requests that it be withdrawn. Once a lien is released, according to Shultman “we no longer have a claim to any asset that the lien is attached to”. So instead of it staying on a credit report even after it is released, the taxpayer can now request that it be withdrawn and ultimately be removed from the credit report.

They can also agree to withdraw a lien if the taxpayer owes less then $25,000 and enters into a “direct debit installment agreement” with the IRS in which the payments are automatically deducted from an account every month. After a probationary period payments determined by the IRS they can agree to withdraw the lien.

They have also raised the threshold from $10,000 to $25,000 for small businesses that owe back taxes and want to participate in installment repayment plans. This will allow hundreds of small businesses to take part in a program they weren’t qualified for before.

Lastly they have revamped their “Offer In Compromise” (OIC). This program allows the IRS to settle a debt for less than what is owed if they do not feel the taxpayer would ever be able to repay the full amount.  Currently a taxpayer must owe less then $25,000 to qualify for this program, but the new adjustments raise that limit to $50,000. This program is based on annual taxpayer earnings and those allowed to participate is determined solely by the IRS.

The biggest effect to consumers in these changes is that once a lien is released and withdrawn, a borrower can more quickly raiser their scores. Having a tax lien on a credit report (paid or unpaid) can easily drop a credit score over 100 points. So investigating payment options can be beneficial in the long term.

My Best,
Sarah Kahley-Rufo

303-778-7782

800-381-2626 (Toll Free)

skrufo@apluscredit.info


 
Categories:

 
Tags:

 

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.

One Response to “IRS to give Tax Lien holders a Break!”

  1. Christian says:

    Wow! This is awesome news! Thanks Sarah!

Leave a Reply