Today the IRS announced that will make it easier for distressed homeowners to avoid having a Federal Tax Lien stop refinancing of a mortgage or the sale of a home.

If taxpayers are looking to refinance or sell a home and that person had a federal tax lien, it can make it very difficult to get clear credit or title to complete the transaction. Lending institutions generally want their lien to have priority on the home being used as collateral. The taxpayer or their representative may file for a Lien Subordination, but that typically takes a minimum of 30 days. The IRS looks to speed up this process.

IRS commissioner Doug Shulman said, “We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes.”

The IRS issues more than 600,000 federal tax lien notices annually.

IRS is adding withholding taxes to the Tier I list of issues.  This means that withholding tax collection activity will get increased organizational priority and coordination for collections and enforcement. They are going to focus on individual, business and corporate taxpayers withholding tax filings, and look for that attempt to circumvent withholding taxes or claiming improper tax treaty withholding rates.

IRS Commissioner Douglas Shulman, “Using informants is another part of our toolkit. Since the inception of the Whistleblower Office in 2007, the IRS has received hundreds of tips on financial institutions and individuals with foreign accounts and international compliance issues. Some of these have become big money cases.”

Many wealthy Americans have been using offshore services provided by foreign banks to evade tax, and some prominent US banks have been willing to help their wealthy clients access such loopholes.

Up until now,  banks funneled billions of dollars of American clients to offshore investments, without disclosing their names to the Internal Revenue Service (IRS) under a program known as “Qualified Intermediary.”  The banks were required to remit taxes due on on the clients to the IRS.

Federal prosecutors claim that Swiss giant UBS helped its American clients hide as much as $20 billion in assets offshore, and evading as much as $300,000,000 in taxes.

The IRS will audit a samples of bank accounts to determine whether U.S. investors actually have control over foreign entities set up by the banks. The US government also succeeded in getting the Swiss tax authorities to hand over confidential data on wealthy American clients of UBS.  Formerly, it was a crime in Switzerland to disclose banking information like this.

With US debt at an alltime high, the IRS is getting serious about collections on, both on Main Stree, Wall Street, and abroad.

Taxpayers with tax debt now have two new resolution options. The IRS is offer two new test programs for post-appeals mediation and arbitration for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (civil penalty) cases. These test programs will be available at the appeals offices in Atlanta, Chicago, Cincinnati, Houston, Indianapolis, Louisville, Ky., Phoenix and San Francisco.

Under these two programs, either the IRS or the taxpayer can request nonbinding mediation, though the taxpayer may decline the IRS’s request for mediation. A request for binding arbitration must be made jointly by the taxpayer and the appeals office.

The post-appeals mediation process is available for both legal and factual issues. The mediator’s role is to facilitate settlement negotiations so the parties can reach an agreement, but the mediator does not have settlement authority over any issue.

The arbitration procedure is available for factual issues only. The arbitrator’s role is to hear both sides of a disputed issue and then render a decision based on the specific factual issue. The decision is binding on both parties. However, the arbitrator does not have the authority to decide that the offer in compromise itself must be accepted or that a person is or is not liable.  Neither party may appeal the decision of the arbitrator or contest the decision in any judicial proceeding.

This is a new program, so it remains to be seen who is going to benefit: the IRS or the taxpayer.  We think, however, that these programs can only but help the taxpayer because fighting the IRS on either the acceptance of an Offer in Compromise, or defending against a Trust Fund Recovery Penalty are both highly technical and paperwork intensive battles.

For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.

By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:

• The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
• The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
• The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
• The annual gift exclusion rises to $13,000, up from $12,000 in 2008.