Last year was the first time that I made a significant amount of money from writing, freelancing, and my blog Frugal Confessions. What an exciting milestone in my life!
Even though I wholeheartedly have planned out the next 40 years of my life financially speaking, for some reason I never opened up a side account to stash away the taxes I would need to pay at the end of the year. I also did not pay my quarterly tax estimates.
Tax Deductions to Lower Taxes
Fortunately for me, we had enough tax deductions (home office, small business costs and deductions, charitable contributions, energy saving tax credit, student loan interest, mortgage interest and property tax deduction) to actually get a tax refund.
Because of the anxiety I felt leading up to filing my taxes, I have learned my lesson and have now opened up a separate account to stash away a percentage of my side income for tax payments. But the experience left me wondering: what if I had owed several thousand dollars and could not afford to pay it all at once?
We’ve discussed options for paying the IRS any taxes owed, as well as tax liens the IRS can levy against your outstanding debt.
New IRS Tax Lien Rules
In an effort to help struggling taxpayers, the IRS will be revamping its tax lien rules. The changes being made are the following:
- Raising the dollar threshold for when the IRS will place a tax lien on you (the new dollar amount will be determined within the next year)
- Streamline the process for withdrawing a lien so that once a taxpayer requests the withdrawal (after paying all tax obligations) it will occur more quickly
- Allow lien withdrawals for taxpayers who owe less than $25,000 and enter into a Direct Debit Installment Agreement (DDIA)
- Raise the dollar limit (from $10,000 to $25,000) to allow additional small businesses to participate in installment agreements
- Streamline the Offer in Compromise (OIC) program as well as allow taxpayers with an income of up to $100,000 to participate, and increase the threshold of tax liability from $25,000 to $50,000
For more information, check out the IRS press release.
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