Fresh Start helped many taxpayers, but at a cost to Uncle Sam
Plus more tax help for struggling filers as part of this week's Daily Tax Tips
Friday, February 20, 2015
The U.S. economy finally appears to be on an upward track. That's good news for the millions of folks who took serious financial hits during the persistent recession that began in 2008.
Things were so bad back then that even the Internal Revenue Service decided to lend a helping hand.
In 2009, the IRS showed its more compassionate side to taxpayers facing financial challenges, which included having difficulty paying their tax-due balances. The IRS committed to being more flexible in working with taxpayers having trouble paying Uncle Sam because of factors related to the weak economy.
Thus began the Fresh Start initiative. Two years later, the IRS expanded its Fresh Start offerings.
Most eligible filers get a fresh tax start: The IRS' Fresh Start goal of helping strapped taxpayers meet their tax obligations in a less painful way has generally been successful, according to a recent examination of the program by Treasury Inspector General for Tax Administration (TIGTA).
Thousands of taxpayers were helped, noted TIGTA in its Dec. 30, 2014, report issued Feb. 11, thanks to the significantly reduced number federal tax lien notices filed by the IRS, the streamlined installment agreement procedures, and taxpayer-friendly changes to offers in compromise.
The number of lien notices, for example, filed on taxpayers with assessed tax liabilities of less than $10,000 decreased 60 percent, from 488,378 in fiscal year 2010 to 195,009 in FY 2013.
But, and there's a but 99.9 percent of the time with TIGTA reports, a handful of Fresh Start taxpayers to whom the IRS was trying to show compassion turned out to be costly.
Taking undue advantage of relief: TIGTA found that 524 taxpayers, owing approximately $10.5 million, defaulted on direct debit installment agreements after the IRS withdrew its lien notices.
Making things worse, the IRS didn't file new liens following the filers' failure to meet their payoff deals.
If these types of lien situations and other potential Fresh Start risks are not fully mitigated, TIGTA warns that the IRS' revenue collection ability could be jeopardized.
Among TIGTA's recommendations are that the IRS file new lien notices for the 524 taxpayers who defaulted on their direct debit installment agreements, establish controls to ensure that new lien notices are filed on future defaulting taxpayers, and establish methods to monitor and assess the performance of the Fresh Start Initiatives.
Fixing Fresh Start: IRS management generally agreed with TIGTA, noting that they plan to review case files and take action when appropriate for the 524 taxpayers in question.
The tax agency also says it plans to determine the viability of making procedural changes, but noted that limited information technology resources budget cuts hamper the IRS' ability to do so at this time.
Meanwhile, Fresh Start is still in place. If you need help from the IRS in dealing with a lien or want to work out a tax payment plan before things get to that level, check it out.
The IRS also offers tax suggestions for financially struggling filers.
This week's Daily Tax Tips help: And, as one of this week's Daily Tax Tips noted, if you're working on getting your finances in better shape yourself by finding a new job, there's tax help for your efforts here, too. You can deduct your job search expenses.
There are some literal limits. First, you must itemize. Second, job hunt costs are counted as miscellaneous itemized expenses and all those sundry amounts must exceed 2 percent of your adjusted gross income before they are of any value on your Schedule A.
You can get the full scoop on job search tax deduction rules in that tip, along with the other four items that ran the work week of Feb. 16-20. They are:
- Selecting tax computer software (Monday, Feb. 16, 2015)
- State and local sales tax deduction (Tuesday, Feb. 17, 2015)
- Deductible job-hunting expenses (Wednesday, Feb. 18, 2015)
- Wash sales warning (Thursday, Feb. 19, 2015)
- Child and additional child tax credits (Friday, Feb. 20, 2015)
Cumulative tax tips pages: These five pieces of advice are now part of the growing February tax tips special blog page.
Check it out if you missed either a Monday-through-Friday tax tip when it was posted in the upper right corner of the ol' blog's home page or the regular Friday end-of-week round-up.
You can find more tax tips on January's page. March and April tax tip collections will appear as those months arrive.
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