The Internal Revenue Service is going to go easier on taxpayers who owe money, its commissioner said on Thursday.
"We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start," Doug Shulman told reporters. "I always encourage our employees to try to walk in the taxpayer's shoes."
He said the agency would immediately double, from $5,000 to $10,000, the size of tax bill which could trigger a lien, in which the agency takes over a taxpayer's property to cover unpaid taxes.
In other moves made effective immediately, the IRS will allow lien withdrawals for taxpayers who enter direct debit agreements with the IRS and will broaden eligibility for offers in compromise, in which the IRS agrees to reduce a taxpayer's bill in exchange for payment. It will also make it easier for more small businesses to enter into installment agreements to pay their tax bills.
The announcement came after complaints that the IRS has been heavy-handed in going after taxpayers who owed money, even in cases where recession-hit taxpayers had no real assets or income with which to pay their tax bills.
Some of those complaints had come from the agency's own independent taxpayer advocate, Nina Olson.
"IRS lien policies are all about 'protecting the government's interest' and don't consider the impact of the taxpayer," she recently wrote in a report to Congress.
"By filing a lien against a taxpayer with no money and no assets, the IRS often collects nothing, yet it inflicts long-term harm on the taxpayer by making it harder for him to get back on his feet when he does get a job," she said in the same report.
The IRS had stepped up its imposition of tax liens in recent years, filing against 1.1 million taxpayers in fiscal year 2010.That's a five-fold increase from fiscal 1999, when 168,000 liens were filed.
Shulman said he expects the number of liens to fall, thanks to an improving economy and new measures that are more taxpayer friendly.
The IRS will double, to $100,000, the annual income threshold for taxpayers permitted to enter offers in compromise, Shulman said. He said the agency will allow taxpayers who enter those compromise deals to keep making their car payments. "I would expect to see acceptances and the number of people getting offers in compromise increasing," he said.
The IRS also will allow small businesses with as much as $25,000 to enter into streamlined installment agreements to pay their tax bills. That threshold had been $10,000.