When will the IRS withdraw a tax lien under its Fresh Start program?

August 16, 2011
by David Allen Duner

Early in 2011, the IRS announced a series of measures to help taxpayers buffeted by the economic slowdown. The IRS calls these measures its “Fresh Start” program and they are intended help taxpayers who want to pay their tax liabilities but because of unemployment, slow business sales or for other legitimate reasons, cannot pay their tax debts. One of the most attractive features of the Fresh Start program involves the withdrawal of a tax lien.

Early in 2011, the IRS announced a series of measures to help taxpayers buffeted by the economic slowdown. The IRS calls these measures its “Fresh Start” program and they are intended help taxpayers who want to pay their tax liabilities but because of unemployment, slow business sales or for other legitimate reasons, cannot pay their tax debts. One of the most attractive features of the Fresh Start program involves the withdrawal of a tax lien.

Liens

When the IRS files a notice of federal tax lien (NFTL) it makes a claim to a taxpayer’s property as security or payment for a tax debt. The IRS must follow very detailed procedures, including sending the taxpayer a notice and demand for payment. If the taxpayer pays the tax debt, the IRS must release the lien within a prescribed period of time; generally within 30 days after the taxpayer satisfies the tax due, including interest and other additions.

There is an important distinction between release of a lien and withdrawal of a lien. Although the IRS may release the lien, the lien generally continues to be reflected on the taxpayer’s credit report unless the lien is withdrawn. This can negatively affect a taxpayer’s ability to get credit or, in some cases, could have a negative impact on the taxpayer obtaining a job if the employer reviews the taxpayer’s credit history.

Full payment

Under the “Fresh Start” program, the IRS has announced that liens will be withdrawn immediately once full payment is made by the taxpayer. The IRS has instructed taxpayers, whose lien has been released after full payment, to request withdrawal of the lien in writing. Taxpayers use Form 12277, Application for Withdrawal, to make this request.

Direct Debit installment agreement

The IRS will also withdraw a lien if the taxpayer agrees to enter into a Direct Debit installment agreement. In this arrangement, the taxpayer consents to having funds automatically debited from a bank account for the agreed upon installment amount. The IRS prefers Direct Debit installment agreements because they are automatic: the taxpayer does not need to remember to send a check or money order.

Not everyone is eligible for lien withdrawal after entering into a Direct Debit installment agreement. The IRS has explained on its web site that qualifying taxpayers are individuals; active businesses with income tax liability only (this would exclude active businesses with unpaid employment taxes); and defunct businesses with any type of tax debt. The current amount owed by the taxpayer must be $25,000 or less. The IRS has advised on its web site that taxpayers owing more than $25,000 may pay down the balance to $25,000 prior to requesting the lien withdrawal to be eligible for the relief. Additionally, the taxpayer’s Direct Debit installment agreement must pay in full the amount owed within 60 months or before the collection statute expires, whichever is earlier. The taxpayer also must have made three consecutive Direct Debit Payments before the IRS will withdrawal the lien.

Taxpayers should use Form 12277 to request withdrawal of a lien after entering into a Direct Debit installment agreement. The IRS warned it will file a new NFTL if the taxpayer subsequently defaults on its Direct Debit installment agreement.

Lien filing thresholds

The IRS has also adjusted the lien filing threshold under the Fresh Start program. The Fresh Start changes increase the IRS lien filing threshold from $5,000 to $10,000. However, the IRS has reserved the right to file liens on amounts less than $10,000 when circumstances warrant.

 

 

For more information about the Fresh Start program contact your accountant

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Posted by Jim Evans

Make One Final Inspection

August 26, 2010

By Jim Evans
Prudential Carruthers REALTORS

In the sales contract, the sellers of your new home agreed to leave the custom blinds, refrigerator, built-in entertainment system and those fine cabinets and workbench in the garage. But when you show up on moving day, all of those amenities are long gone. Moreover, the lock on the back door is broken; there is a huge gouge in the drywall near the front bathroom.

Although these circumstances are extreme, they could happen, which is why it is important to have a final inspection of the home you are purchasing before the closing. A pre-closing inspection gives you, one last opportunity to verify that you are getting all that was promised in the sales contract. Although buyers still have legal recourse if they discover—even after closing—that the condition of the home is not as it should be. Of course, the best time to identify problems is before closing when the seller will be motivated to correct any deficiencies to close the transaction.

Typically, a buyer takes possession of a property one to three months after signing the sales agreement. And a lot can happen before the actual move-in. Appliances and fixtures can break, and walls, carpets and doors can be damaged during the seller’s final weeks in the house, particularly during move-out. Sometimes the seller will simply have forgotten that he or she has agreed to leave the refrigerator or window coverings with the house. Whatever the reason, problems identified before the closing have the best chance of being remedied.

If possible, schedule the inspection right before the closing, such as the day before. Ask your real estate professional to attend the inspection with you. Here’s what to do:

Using a copy of the sales contract as a checklist, first make sure that all items that should be in place (appliances, built-in furniture, window coverings, fixtures, etc.) are there.

Test each appliance to make sure they work properly. Bring along an electrical clock or radio to test each electrical outlet. Test all electrical switches and the garage door opener. Run the garbage disposal and turn on every water faucet, checking under the sinks for leaks. Flush the toilets. Inspect the floors, carpets, walls and doors for recent damage.

If you discover that something is damaged or missing, make a note of it and inform your real estate professional immediately. In most cases, the seller is usually able to take care of small problems immediately, either by making a needed repair or offering compensation to handle it. And, if there are major problems, the seller can even sign a statement acknowledging the deficiency and agree to correct it. Although pre-closing inspections take time and may be inconvenient, they are important and well worth the buyer’s time.

Jim Evans can be reached at (703) 497-7788. Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

Leave a Comment » | Due Diligence | Tagged: , , , | Permalink
Posted by Jim Evans

July 7, 2010

Visit houselogic.com for more articles like this.

Copyright 2010 NATIONAL ASSOCIATION OF REALTORS®

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Posted by Jim Evans

Inspect, especially a foreclosed home!

February 25, 2010

I was at a home this morning where the buyer realized that they had bitten off more than they could chew. This was my first visit to the home as Laura had done all the work to this point, but had asked me to come by and look for the water main. This is a HUD (government) owned home. They are ALL sold in “As Is” condition. As I arrived I met the home inspector whom we had set up for these first time buyers. I immediately knew this was going to be an interesting challenge. The gutters were falling from the front of the home and leaking water all over the sidewalks. There was a note on the door from the water company that said they could not turn the water on due to water running inside the home. HUD had believed it to be winterized, (drained and shut off from inside, so as not to have freezing pipes). The water company was kind enough to come back out while we were there. The water main valve was located in the crawl space under the home. Water on – leaks everywhere. No access to a rear shed, no refrigerator and at least two water valves that were in need of replacement. The side deck was so rotted that it was unsafe to stand on. They were using a VA loan for financing, so all repairs would be required  to be completed before closing and at the expense of the purchaser. Not realistic for this nice couple. Needless to say, no go on this one. $250 well spent to find exactly what the young couple is getting. Well, Laura is back on the job looking for the next gem in their price range.

Jim Evans

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Posted by Jim Evans

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