The IRS Fresh Start Program for Small Businesses

The Internal Revenue service also helps small businesses who are unable or struggling to meet their tax obligations with tax relief.  In February 2011, the IRS Commissioner announced a new initiative designed to help small businesses get a fresh start with tax liabilities.

The Fresh Start initiative was redesigned so that IRS collection practices have a lessened negative impact on taxpayers.

The Fresh Start initiative also increases the IRS Notice of Federal Tax Lien filing amount.  The previous threshold of $5,000 has been increased to $10,000 of tax debt.  The IRS will not retroactively apply the new $10,000 lien notice filing threshold and automatically withdraw a previously filed lien, the business owner will have to take this action.

Tax Lien Withdrawal

Another change to federal tax liens is that the IRS is now able to withdrawal a Notice after the lien has been released.  If business owners want to have the Notice of Federal Tax Lien withdrawn, a request must be submitted in writing.  For instance, the business owner should check the last box; “The Taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”

In order to be eligible to request a lien withdrawal after the lien has been released the requirements are:

  • The tax liability has been met and the lien has been released
  • The business is in compliance for the previous three years (at the point in time of the request) in filing all individual and business returns and all information returns
  • The business is current on estimated tax payments and all federal tax deposits as they apply to the business.

IRS Direct Debit Installment Agreement

Qualifying taxpayers for the business who meet eligibility requirements can have the Notice of Federal Tax Lien withdrawn if they enter into a Direct Debit installment agreement.  As it was true for after the lien has been released, the request for lien withdrawal must be in writing. Qualifying taxpayers for a direct debit installment agreement are:

  • Individual Taxpayers
  • Business with income tax liability
  • Closed businesses with tax debt

In order to be able to sign up for this type of IRS Direct Debit installment agreement, the business must meet eligibility requirements:

  • The amount of tax debt owed is $25,000 or less
  • The taxpayer owed more, but was able to pay down the balance to $25,000 before requesting lien withdrawal
  • The tax debt must be paid in full within the earlier of 60 months or before the Collection Statute expires.
  • Have filed all tax returns necessary and are current with tax payments
  • Have not received a lien withdrawal for the same taxes
  • Have not defaulted on any current or previous direct debit installment agreement.

Taxpayers who are facing federal tax lien issues should consult with an experienced tax attorney. Negotiating and working with the IRS can be very difficult if you do not know the rules, and especially with an installment agreement, the taxpayer needs to be comfortable with the monthly payment amounts to make sure they are affordable.

By: Timothy S. Hart

 

Sources:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Fresh-Start-Notice-of-Federal-Tax-Liens