Our domestic economy is showing signs of a modest recovery, despite the problems in Europe and the fact that this is an election year. American households are gradually paying down their collective debt load, and bankruptcy filings are actually down seven percent year-over-year. Usda first home buyers are also seeing an improvement on their rates. Averages, however, can be misleading. A major portion of our society is still struggling to make ends meet, and, if the IRS is pounding on your door for back taxes, penalties, and interest, then your workable options seem slight, if any.
Recently published data from the St. Louis division of the Fed reflects that consumers have materially reduced their debt service payments as a percentage of their disposable income. The chart below tells the story:
Recently published data from the St. Louis division of the Fed reflects that consumers have materially reduced their debt service payments as a percentage of their disposable income. The chart below tells the story:
Households blew past pre-recessionary levels, approaching levels not seen since the nineties. This chart, however, masks the situation that less fortunate families must deal with in today’s slow-growth economy. For example, less than 200,000 tax liens were issued in 1999, but today that figure has risen above 1.1 million per year.
Out of obvious concern for taxpayers and a desire to reduce internal processing costs, the IRS made a move nearly a year ago to lessen the severity of their dreaded “knock at the door”. In February of 2011, the IRS announced a series of new steps to assist individuals and small businesses deal with unpaid tax liabilities. The changes apply to the following five areas:
1) The threshold for a tax lien has been increased from $5,000 to $10,000;
2) Upon full settlement of your taxes, the IRS will issue a tax lien withdrawal, as opposed to a lien release. A tax lien withdrawal will cancel the lien from your credit score whereas in a tax lien release the lien will remain on your credit record for 7 years after your tax settlement date;
3) If your tax liability is not more than $25,000 and you enter a “Direct Debit Installment Agreement”, the IRS will allow you to receive a lien withdrawal even if you do not completely settle your back taxes;
4) Small business owners will now be able to pay their back taxes in installments as long as the amount is less than $25,000;
5) In the past, individuals that wished to apply for an “Offer in Compromise” were required to earn less than $50,000 a year and have a liability less than $25,000. These “ceilings” have now been raised to $100,000 and $50,000, respectively.
These rule changes apply on a federal level, but taxpayers should also review their states for related modifications. For example, Florida is having a rough time with unemployment, but one company associated with ac repair florida is turning a corner and making strides to show recovery. Other options are to seek tax debt relief from an independent loan provider, or, in the worst case, file for bankruptcy. Bankruptcy laws now allow for some relief from taxes if the following five requirements are met:
1) The due date for filing a tax return is at least three years ago;
2) The tax return was filed at least two years ago;
3) The tax assessment is at least 240 days old;
4) The tax return was not fraudulent;
5) The taxpayer is not guilty of tax evasion.
The IRS has definitely made it easier to settle and move on with your life. IRS regulations, however, can be complex. Consulting an experienced tax professional is always advisable.