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may release the lien, the lien generally continues to be reflected on the taxpayer’s credit report unless the lien is withdrawn.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Under the “Fresh Start” program, the IRS has announced that liens will be withdrawn immediately once full payment is made by the taxpayer.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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We just got back from Walt Disney World, and were amazed with what we saw. Mickey and Minnie seemed to be fairing the recession pretty well, but Orlando looked like it had been through a war. It seemed as if every third home had a “for sale” sign in the yard.

According to the National Association of Realtors, California, Nevada and Florida were hit the worst in the housing downturn. For those of us that work in the Northern Virginia marketplace, it is easy to forget how shielded we are due to the Federal government. Virginia’s unemployment rate is currently at 6.3%. Contrast that with Florida’s at 11.1% which is only beaten by the two states previously mentioned, California and Nevada.

In Northern Virginia we have just moved into a sellers market, with only 2.9 months of inventory on hand. Properly priced homes are getting quick offers and sometimes multiple ones. According to AOL Real Estate 7% of homes in Orlando are vacant and sales are down by 30% from 2010. Ouch!!! Home values have fallen over 12% in the past year, while we are seeing prices creep back up here in our area. See our market video here!

Even if your real estate business is off a bit from past years or you are underwater in your northern Virginia home, you may want to count your blessings. It could be a whole lot worse. Orlando is a GREAT place to visit, but I think I’ll take selling homes in Virginia over the move down south…at least for now!

Filed under: Housing market, How's your Market?, Northern Virginia, Statistics  |   Tagged under DC, Fairfax, Housing Market, Northern Virginia, Prince William | No Comments »

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