Practice Tip: Tax Liabilities

Tax liens are detrimental to credit ratings and could be carried on a credit score for up to seven to ten years. The lien can only be removed by the IRS upon the satisfaction of the liability, but it will not repair the damage to the individual's credit score.

The Fresh Start Program is valuable because it accomplishes three things for the taxpayer: 1) The amount of delinquent taxes owed before a Notice of tax lien is raised from $5,000 to $10,000. Once the taxpayer has enrolled in a direct debit installment agreement, the Notice of Federal Tax Lien is withdrawn. Any tax lien that has been entered can be requested to be withdrawn, as well; 2) Taxpayers owing up to $50,000 can make monthly installment payments for up to 72 months. Taxpayers owing more than $50,000 or those who require more than six years to repay their liability remain eligible and have to provide some additional information. 3) The IRS's established Offer in Compromise program is expanded and given flexibility in analyzing a taxpayer's ability to pay, therefore, creating more opportunities for delinquent taxpayers.

This program is extremely worthwhile for eligible taxpayers. The IRS is interested in collecting as much tax as they can and this program demonstrates their willingness to place people in reliable repayment plans based on their available cash flow. This program is far from a scam and warrants consideration by attorneys and tax professionals.
' Aaron Weems, Fox Rothschild

Divorce can often devolve into economic warfare. For some people, tax issues ' through neglect, naivet', or as a result of an asset liquidation or distribution ' create tax liabilities for which they were unprepared. As a result, it is not uncommon for divorce litigants to require tax liability mitigation.

It was with this in mind that I skeptically listened to a radio commercial for the IRS's “Fresh Start” tax relief program. The celebrity pitchman was extolling the virtues of this program on behalf of a tax relief company. My initial response to this ad was that it was probably a predatory program, but after doing some research, I learned that it is a legitimate program offered by the IRS. The basic premise of the program is to give delinquent taxpayers (including small businesses) an incentive to enter into an offer in compromise with the IRS to pay their back-taxes.

When taxpayers are delinquent on their taxes, the normal process is for the IRS to issue a Notice of Federal Tax Lien at which point they have 10 days to satisfy the liability before a tax lien is filed against them. 26 U.S. Code ' 6321 specifically states that, “If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ' shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.”

Tax liens are detrimental to credit ratings and could be carried on a credit score for up to seven to ten years. The lien can only be removed by the IRS upon the satisfaction of the liability, but it will not repair the damage to the individual's credit score.

The Fresh Start Program is valuable because it accomplishes three things for the taxpayer: 1) The amount of delinquent taxes owed before a Notice of tax lien is raised from $5,000 to $10,000. Once the taxpayer has enrolled in a direct debit installment agreement, the Notice of Federal Tax Lien is withdrawn. Any tax lien that has been entered can be requested to be withdrawn, as well; 2) Taxpayers owing up to $50,000 can make monthly installment payments for up to 72 months. Taxpayers owing more than $50,000 or those who require more than six years to repay their liability remain eligible and have to provide some additional information. 3) The IRS's established Offer in Compromise program is expanded and given flexibility in analyzing a taxpayer's ability to pay, therefore, creating more opportunities for delinquent taxpayers.

This program is extremely worthwhile for eligible taxpayers. The IRS is interested in collecting as much tax as they can and this program demonstrates their willingness to place people in reliable repayment plans based on their available cash flow. This program is far from a scam and warrants consideration by attorneys and tax professionals.
' Aaron Weems, Fox Rothschild