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IRS eases rules on liens for delinquent taxpayers

Sun., Feb. 27, 2011

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 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The change will make it easier for people to have liens withdrawn once tax bills are paid or they start paying under certain installment plans.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.

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.

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, said Nina E. Olson, the National Taxpayer Advocate, an internal watchdog within the IRS.

Tax break for same-sex couples

Many same-sex couples are getting a tax break this year from the IRS, according to new requirements to report their combined income on federal tax returns.

Under “income splitting,” the IRS is requiring all same-sex married couples or registered domestic partners in Washington state, California and Nevada to divide their combined income equally and report it on their separate tax returns.

For some couples, it will mean more money in their 2010 refund; for others, they’ll pay more in taxes.

Either way, the change is significant, both monetarily and emotionally, officials of Lambda Legal, the national gay and lesbian legal rights group, said Tuesday in a conference call with reporters.

Those who will save the most are same-sex couples with the biggest disparities in income. For instance, a couple where one earns $100,000 and the other is a stay-at-home spouse with little or no income, will split their combined community earnings on their individual tax returns, with each reporting $50,000 in income. The result: an overall lower tax bill for both.

To illustrate, Lambda officials cited the example of a hypothetical couple: “David,” an attorney earning $225,000, and “Richard,” a librarian with $20,000 in income, would see a combined savings of $6,824 in taxes.

The IRS ruling applies in only those states that have community property laws and that recognize married same-sex couples and registered domestic partners.


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