Treasury Inspector General for Tax Administration recently reviewed and commented on the IRS Fresh Start Initiatives. The program, introduced in 2011, streamlined and made small changes to processes involving offers in compromise, direct debit installment agreements and Notices of Federal Tax Liens. Taxpayers did get some relief, TIGTA reported.
However, the IRS had let some things fall through the cracks. Specifically, the agency had withdrawn NFTLs for taxpayers that with direct debit installment agreements. TIGTA counted 524 taxpayers that had defaulted on their installment plans but had not had the NFTLs refiled. TIGTA noted that this was bad.
An IRS official disagreed. If you owe taxes, the commissioner explained, the IRS can place a lien against your property. The agency then issues a notice informing other creditors that the government's claim has a higher priority than other liens -- unperfected mechanic's liens, for example. Without the notice, the tax lien would be among the last to be paid.
The effect of withdrawing the notice, then, is sending the lien to the bottom of the list. The lien is not wiped out; its priority has changed, that's all.
TIGTA's assessment did not end with the 524 withdrawn NFTLs. TIGTA says, too, that the IRS should make sure that controls are in place to verify that NFTLs are filed for installment defaults going forward.
Even if it took almost two years to launch the Fresh Start Initiatives, the IRS seems to have skipped some steps along the way. We'll get into the particulars in our next post.
Source: Accounting Today, “IRS Fresh Start Initiatives Come under Scrutiny,” Michael Cohn, Feb. 11, 2015