International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Sunday, February 22, 2015

The IRS's Fresh Start Initiatives Have Benefited Many Taxpayers, But Additional Monitoring and Evaluation is Needed

TigtasealThe Internal Revenue Service (IRS’s) Fresh Starts Initiatives has helped thousands of struggling taxpayers resolve their outstanding tax liabilities.  However, if the potential risks are not mitigated, revenue collection could be jeopardized.  That is the conclusion of a new report by the Treasury Inspector General for Tax Administration (TIGTA).

In 2009, the IRS announced some existing and new alternatives available to taxpayers facing financial challenges and having difficulties paying their balance due accounts because of the declining economy.  In February 2011, the IRS began implementing the first of several initiatives to assist economically distressed taxpayers by offering viable collection alternatives to help resolve their delinquent balance due accounts.  These initiatives are known as the Fresh Start Initiatives and include policy changes to installment agreements, offers in compromise, and Notices of Federal Tax Lien (NFTL).

This audit was initiated to determine the impact of the Fresh Start Initiatives in promoting tax compliance.

TIGTA found that the IRS’s implementation of the Fresh Start Initiatives provided several benefits to thousands of taxpayers.  For example, the number of NFTLs filed on taxpayers with assessed liabilities below $10,000 decreased 60 percent, from 488,378 in Fiscal Year (FY) 2010 to 195,009 in FY 2013.  Many other taxpayers benefited from streamlined procedures for processing installment agreements and offers in compromise.  In addition, penalties were not assessed on certain taxpayers who requested a filing extension.

Although the Fresh Start Initiatives were generally implemented effectively, additional attention should be given in several areas.  For example, 524 taxpayers, who owed approximately $10.5 million, defaulted on their direct debit installment agreements after the IRS had withdrawn the NFTLs, yet the IRS did not file new NFTLs.  In addition, the IRS has not fully assessed the revenue impact of filing fewer NFTLs.  Performance measures may have helped identify potential problems and areas for improvement, but those measures were not established for all of the initiatives.

TIGTA recommended that the IRS:  1) File new NFTLs for the 524 taxpayers who defaulted on their direct debit installment agreements after their NFTLs were withdrawn; 2) establish controls to ensure that new NFTLs are filed on taxpayers who default on their direct debit installment agreements; 3) assess the long-term revenue protection impact of the Fresh Start Initiative that increased the minimum dollar threshold for NFTL determinations in Field Collection; and 4) establish methods to monitor and assess the performance of the Fresh Start Initiatives.

IRS management generally agreed with TIGTA’s recommendations.  They plan to review case files and take action when appropriate for the 524 taxpayers, determine the viability of making a systemic enhancement or procedural changes for filing new NFTLs, and initiate a research request to evaluate potential revenue protection impact on NFTL filing determinations.

Although IRS management agreed that there should be established methods to assess performance, they stated that their limited information technology resources prevent them from submitting or completing a work request at this time.

Read the report.

 

https://lawprofessors.typepad.com/intfinlaw/2015/02/the-irss-fresh-start-initiatives-have-benefited-many-taxpayers-but-additional-monitoring-and-evaluation-is-needed.html

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