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Shulman, Olson Differ Over ‘Fresh Start' for Taxpayers From Lien Changes

By Kristen C. Ricaurte
Publication Date: 02/25/2011

Internal Revenue Service Commissioner Doug Shulman Feb. 24 announced several tax initiatives aimed at giving taxpayers a “fresh start” and helping them meet their tax obligations.

IRS plans to raise the dollar amount triggering the filing of tax lien, as well as allowing taxpayers to request a lien withdrawal once a debt is paid in full, Shulman said in a phone call with reporters to discuss the changes.

The service also is increasing access to installment agreements for small businesses and expanding the streamlined offer in compromise (OIC) program. Additionally, in most cases IRS will not file a lien if a taxpayer enters into a direct debit installment agreement, Shulman said.

Changing the dollar amount threshold for filing a lien unburden tens of thousands taxpayers, Shulman said, adding that giving taxpayers the option to request a lien withdrawal once their tax debt has been paid will give taxpayers a fresh start.

“Taken together, these five steps represent an important set of changes for taxpayers. We think these 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,” Shulman said.

Installment Agreements for Small Business

Shulman said the service is giving more small businesses the opportunity to take advantage of streamlined installment agreements by increasing the threshold amount for participation.

Small businesses with $25,000 or less in unpaid taxes will be eligible to participate in the program, increasing the current dollar amount of $10,000 by more than 100 percent, according to an IRS news release detailing the changes (IR-2011-20).

“Small businesses are an important part of the nation's economy, and the IRS should help them when we can,” Shulman said. “By expanding payment options, we can help small businesses pay their tax bill while freeing up cash flow to keep funding their operations.”

Shulman also said the service is opening up the new streamlined OIC program to a larger group of taxpayers, allowing taxpayers of annual incomes as high as $100,000 to participate.

Taxpayer Advocate Critiques Changes

Shulman said the changes included in today's announcement came in part from consulting with the IRS Advisory Council and National Taxpayer Advocate Nina Olson.

In a Feb. 24 statement responding to the announcement, Olson said the changes are a step in the right direction, but expressed concerns that IRS is “addressing the symptoms and not the root causes of the problem.”

Olson also expressed concern over IRS's lack of specificity regarding the lien threshold increase amount and the number of taxpayers benefiting from the increase.

Failure to Contact Taxpayers Causes Problems

Currently, liens are filed automatically and without consideration for a taxpayer's financial situation. Additionally, IRS has not evaluated the compliance value a lien may have, or if it would encourage noncompliance, she said.

IRS makes little effort to contact taxpayers in person once a collection notice is sent out, causing the debt to fester. This leads taxpayers to believe IRS is ignoring their debt, she said, and by the time the service takes notice of the debt, it is often too large for a taxpayer to pay.

Olson's 2010 Annual Report to Congress, released Jan. 5, criticized IRS's use of liens and the impact IRS's collection practices have on financially struggling taxpayers.

The complete text of this article can be found in the BNA Daily Tax Report, February 25, 2011. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »

© 2011, The Bureau of National Affairs, Inc.