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IRS to show mercy to delinquent taxpayers

Agency says it will file fewer liens and make it easier for businesses to pay on installment plans.

By MSN Money Partner Feb 24, 2011 5:06PM

This article is by Stephen Ohlemacher of The Associated Press.

The Internal Revenue Service says it's trying to help people who are struggling to pay delinquent tax bills, so it's reducing the number of property liens and easing rules for small businesses to enter into installment agreements.

As the economy has soured, the agency has filed an increasing number of liens on property owned by delinquent taxpayers. The IRS filed nearly 1.1 million liens in the budget year that ended in September, compared with 426,000 in 2001.

The steps announced Thursday will double the amount of back taxes a person can owe before facing a possible lien. Previously, taxpayers who owed at least $5,000 and ignored numerous IRS notices would get an automatic lien placed on their property. Under the new policy, the threshold is increased to $10,000.

The change will make it easier for people to have liens withdrawn once tax bills are paid or they start paying under certain installment plans. More taxpayers can settle their tax debt for less than they owe, if they meet certain income and debt requirements.


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Small businesses with larger delinquent tax bills will be eligible for 24-month payment plans. Previously, the tax bill had to be less than $10,000; now it's up to $25,000.

The agency believes the changes "will help people trying to get right with their taxes and we think it strikes the right balance to protect the interests of the government," said Doug Shulman, the IRS commissioner.

The changes, however, don't go far enough, said Nina E. Olson, the national taxpayer advocate, an independent watchdog within the IRS. The agency will still file liens automatically, without analyzing whether a lien is likely to generate any tax revenue, she said.

"The IRS often files liens against taxpayers who own insignificant or no property interests to which the liens can attach. As a result, the lien filing simply damages the taxpayer's financial viability and impairs future tax compliance without any corresponding revenue benefit," Olson said in a statement.

The IRS expects to process more than 140 million tax returns this year, and the vast majority will qualify for tax refunds. But with the economy still weak, and the national unemployment rate at 9 percent, many taxpayers who owe money will be unable to make timely payments. 

Liens are notices filed in land records to ensure the government can collect back taxes when property is sold. They also alert potential creditors and employers that property owners owe back taxes.

Even once tax bills are paid and liens removed, they can remain on credit reports for years, hurting the ability of taxpayers to get loans or even a job.

Olson, in her annual report to Congress last month, criticized the IRS for relying too much on liens and other "hard-core enforcement tools."

"A tax lien can be particularly devastating to small businesses, as it often cuts off their access to credit," Olson said in the report.

Shulman said he expects the number of liens filed to be reduced by "tens of thousands." He said he couldn't be more precise because there are too many unknown factors, including the state of the economy. The number of liens filed tends to increase as the economy falters.

"A federal lien is an important tool for the IRS. It gives us legal claim to a taxpayer's property for unpaid tax debt, which protects the government's interest," Shulman said. "But we also recognize that this tool must be used judiciously."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Feb 24, 2011 7:46PM

Kind of confusing...? IRS Files a Record number of liens against citizens...

then claims the IRS will show mercy for delinquent taxpayers...?

Sounds  like talking out of both sides of their mouth at

the same time...

Feb 24, 2011 10:22PM
Oh poor Phil - they put a lien on your vacation account - you are right, you shouldn't have to pay taxes because you have vacations to take, just let everyone else pay while you're in Disney Land!
Feb 24, 2011 9:47PM
I think there are going to be quite a few delinquent taxpayers this year. Or should I say "non"-taxpayers. Lots of people and businesses have lost their jobs, closed their doors and can't pay. I would love to see the stats on extensions and delinquent filers this April. The government on all levels are broke and they want their money! IRS is going to be merciful huh? Yea, we'll see..
Mar 1, 2011 10:40PM

There is $1 trillion owed in back taxes and penalties by individuals that have illegal Swiss bank accounts -- and they are getting away with absolutely no penalties -- because it was blocked on how they could be caught.


The top 400 earners made $1.4 trillion and paid an average tax rate of 16%.


Two thirds of the S&P 500 do not pay US income taxes -- including GE, Intel, Microsoft, Exxon, Google, Halliburton, etc.


Let's string up the local dry cleaner from the nearest stop light -- and continue to let the 500 largest corporations and banks that have $4.1 trillion in cash on their balance sheets -- to not pay taxes.


Seems like a Tea (something-for-nothing) Party plan to me.





Feb 26, 2011 6:37PM
Jones, YOU haven't got a clue! Cheats?? Big words from somebody which obviously was born with a silver spoon in your ---. The economy and other mitigating factors (health) led to many persons not having the ability to pay if they wanted! After years of paying and living the American dream the economy and family illness has placed our family on the list of as you refer to as cheaters. We went from a home appraised at 325,000.00, which we built with with our blood, sweat and tears, into a structure with no heat, running water etc. Do you think there  was any assistance offered by the government? No! My mistake it was offered to foreign interest. It is our wish to you, that you you experience the same treatment from our government as we have experienced first hand! Oh, and yes we love our country, but we also fear our government and where it is headed due to the complacent attitudes of persons like yourself. This is not to be construed as an attack  on your person, but as one against all persons which share your narrow mindedness! Wake up America! Keep our noses and money at home in the good old USA!
Feb 28, 2011 5:42PM
In my town a restaurant owner claimed his waitress's were contract workers and paid no social security taxes. Another one was a clothing business. Did not pay social security taxes or income taxes for years.  A vending company boss. Has his wife drive around in company van and lives in a company house. A doctor bought another $500,000 house and it is a trust house now. A good friend  had to pay back taxes for not reporting no income for years. PS: I did not turn him in.  This is just a few cases I know. Welfare cheats are also many in my town. I was not born with a silver spoon.
Oct 26, 2011 8:56AM

The IRS has to collect from some of the corporations that haven't paid taxes and back off the working man with a family to support.  I know of one corporation that hasn't paid TAXES SINCE 2007. The man has 3 corporations is back due on all taxes. He set up payment plans (every year to pay the same debt) but make only one payment on it, he repeats this all the time. However even though he can't pay he's federal or state tax, social security, or unemployment that are years past due HE BOUGHT HIS 4th HOUSE THIS PAST YEAR.

The dictionary should define the word corporation as "A way to get out of paying taxes, no matter how small."

I own my business and pay all taxes on time every quarter, in full.  I'm still dreaming of owning that first home. THE AMERICAN DREAM DIED FOR THE WORKING MAN AND WOMAN ALONG TIME AGO.

this is a blatant lie on their part. i owed  $900.00 and they put a lien on my vacation account this january.
Feb 24, 2011 9:22PM

The IRS often files liens against taxpayers who own insignificant or no property interests to which the liens can attach. As a result, the lien filing simply damages the taxpayer's financial viability and impairs future tax compliance without any corresponding revenue benefit," Olson said in a statement.


Ohhh, poor tax cheats... my heart is aching for you. Heaven forbid that people who don't pay their taxes should lose their "financial viability" or access to credit. I'm sure that if we just let them off the hook then that would not "impair future tax compliance" at all. If they don't pay their taxes and then there are no consequences then why would they pay their taxes in the future?


Phil, why are you worried about going on vacation if you haven't paid your taxes? No one likes to pay taxes but your failure to do so means more for the rest of us. You made your own bed.

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