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- The IRS: Still Over “Liening”?
The IRS: Still Over “Liening”?
National Taxpayer Advocate, Nina Olson, for the past few years has critiqued the IRS’s lien policy. In her 2012 annual address to Congress, she addressed the results of the “Fresh Start” initiative, which enacted several operational policy changes in FY 2011 and 2012, offered further recommendations for the implementation of the “Fresh Start” initiative, and suggested additional policy changes.
Improvements resulting from the “Fresh Start” initiative include:
The number of NFTLs [Notices of Federal Tax Lien] peaked at 1.1 million in FY 2010. As a result of the IRS “Fresh Start” initiative, the IRS has filed significantly fewer NFTLs in FY 2012, i.e., approximately 708,000 NFTLs, representing a reduction of about 32 percent from the FY 2011 volume.
..in FY 2012, thousands of financially struggling taxpayers have successfully obtained lien withdrawals to help regain their financial viability. The number of withdrawals issued by the IRS in FY 2012 increased 157 percent over FY 2010.
The IRS has accepted 21 percent more (Compromise) offers in FY 2012 than in FY 2011, and that the actual number of accepted offers has increased by 122 percent compared to FY 2009. In FY 2012, the offer acceptance rate of 38 percent was the highest in many years. During FY 2012, the IRS accepted in compromise $195.7 million, a 27 percent increase over the prior year.
Further recommendations and critiques include:
…the National Taxpayer Advocate is concerned that installment agreements (IAs) approved by the IRS actually declined in FY 2012 — by two percent in total, with a corresponding reduction in “streamlined” agreements of four percent.
…the numbers of business taxpayers receiving IAs and “express” streamlined agreements have actually declined during the past fiscal year by approximately six percent and seven percent, respectively.
…the IRS continues to file most NFTLs based on a dollar threshold of liability, without human review of the facts and circumstances of each particular case.
Taxpayers with NFTLs paid an average of $25,845, or about 69 percent of their original liabilities. Non-lien taxpayers paid $38,477, equivalent to about 111 percent of their original liabilities…These findings indicate that the IRS needs to develop new, meaningful lien filing criteria based on quantifiable evidence that filing a NFTL in certain situations clearly results in increased revenue collections and improved voluntary compliance with the affected taxpayers.
Further, the IRS needs to better promote the “Fresh Start” initiative in its internal Collection training and external communication strategies, as well as allocate adequate resources to its functions to ensure the benefits of the initiative are real and sustainable.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.