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Fresh Start program, part 2: tax liens and direct deposit defaults

February 25, 2015


IRS in 2009. This program has been beneficial to many taxpayers in resolving tax debt and avoiding federal tax liens.

But as the Treasury Inspector General for Tax Administration (TIGTA) found in a recent report, there are several ways in which the Fresh Start program could be improved. In this part of this post, we will discuss TIGTA’s findings on tax liens.

Under Fresh Start, the IRS withdrew federal tax liens for taxpayers who entered into direct debit installment agreements. According to TIGTA’s audit, more than 500 taxpayers have defaulted on those agreements since 2011. These defaults involve about $10.5 million in tax liability.

The problem with the defaults was not that the IRS withdrew the tax liens in the first place. After all, the purpose of this part of the Fresh Start program was to give taxpayers a better chance to make payment arrangements, rather than have to deal with a tax lien.

TIGTA did find a problem, however, with the IRS’s failure to refile Notice of Federal Tax Liens (NTFLs) after the defaults.

TIGTA is therefore not only recommending that the IRS refile NTFLs against those who defaulted on installment agreements that were to be paid through direct deposit. TIGTA is also recommending that the IRS create better internal controls to make sure new NFTLs are filed in cases of default.

In short, the IRS is supposed to tighten up its procedures on tax liens and direct deposit installment agreements.

Source: Treasury Inspector General for Tax Administration, “Report: The IRS”s Fresh Start Initiatives Have Benefitted Many Taxpayers, But Additional Monitoring and Evaluation is Needed,” Feb. 11, 2015

Tax Controversy