The IRS Fresh Start program, part 1: how does it affect tax liens?

In 2009, in the midst of the Great Recession, the IRS launched an initiative intended to ease the burdens of financially strapped individuals and businesses burdened by back taxes. It was called “Fresh Start.”

The program sought to help taxpayers find ways to avoid federal tax liens and resolve their tax debt through means such as installment agreements or offers in compromise (OIC). In this two-part post, we will discuss the Fresh Start program, beginning with how it affects tax liens.

The Fresh Start program generally raised the threshold amount for the IRS to file a Notice of Federal Tax Lien (NFTL). The threshold doubled from $5,000 to $10,000. In some cases, however, the IRS can still file a NFTL when the amount is less than $10,000.

If you have paid off or made other arrangements to resolve your tax debt, Fresh Start also allows the IRS to withdraw a NFTL even after it has been filed. You must, however, meet certain eligibility requirements and formally request the withdrawal in writing. The form for this request is Form 12277.

One way to resolve tax debt is through a Direct Debt installment agreement. But keep in mind that if you default on that agreement, the IRS can file a new tax lien.

Recently, the Treasury Inspector General for Tax Administration (TIGTA) released the results of an audit of the Fresh Start program. TIGTA found, for example, that the number of federal tax liens filed against taxpayers who owed less than $10,000 went down by 60 percent from Fiscal Year 2010 to FY 2013.

We will discuss other aspects of TIGTA’s findings in part two of this post.

Source: “IRS.gov, “Struggling with Paying Your Taxes? Let IRS Help You Get a Fresh Start“
Additional Source: IRS.gov, “IRS Fresh Start Program Helps Taxpayers Who Owe the IRS”