What is a tax lien?

On: August 4, 2019

A tax lien is a public document filed by the IRS and/or other tax agencies (state, city, property, sales and use, etc…) (the “IRS”) securing an interest against you and your property for tax liabilities that you owe the government. This is not a levy, garnishment or seizure. Instead, it places itself in line in case you were to sell an asset. It does so in such a fashion that it is public knowledge. For example: If you were to sell a house for $100, the bank first takes and pays off a remaining loan balance of $50, leaving you with $50. If you owed the IRS $50, it would then be in a position to take the $50 right out of escrow. The bank (the tax lien being on the public record) would just send it to the IRS without even notifying you. Tax liens can be bad for credit and interfere with small business functioning and personal credit. In many professions requiring state licensing, a tax lien can interfere with getting your license or having it renewed (ie: real estate and insurance professionals). The statute of limitations for collections on a IRS tax lien is 10 years, however, the IRS can elect to renew it for an additional 10 years after that. How can I remove a Tax Lien? IRS tax liens are serious business that the IRS does not take seriously in filing them against taxpayers. They are filed quickly and, while notice is given, at the seeming drop of a hat. Then they become very difficult to get removed because the IRS’ attitude is “It’s just a lien. There is no immediate hardship. If they want it removed, they should pay their tax debt in full.” It is now time to consider hiring a tax professional, preferable an attorney, as there is going to be storytelling, documentation and a lot of procedure to go through. To get a Release of Lien, a Withdrawal of Lien or a Removal of Lien, you will have to either show that (A) the IRS was wrong in filing the tax lien or (B) that it is causing a hardship that prevents you, the taxpayer, from paying the liability to the IRS.

• Proving the IRS was wrong in filing a lien against you is very difficult. You can show that you do not owe the IRS. You can also attempt to show that the IRS made a mistake in filing the lien against you. This will require proving up a mathematical or procedural error on the part of the IRS. This latter will require providing documentation from the IRS supporting you position. The IRS rarely provides any documentation whatsoever other than wage and income data, account transcripts, records of accounts and tax return transcripts. The IRS is not in the business of issuing self-incriminating documents
• Proving that the filing of the lien is causing you (the taxpayer) a hardship that interferes with your ability to pay the IRS is more common. A taxpayer if often unable to sell a house, even if he/she intends to pay the IRS with the proceeds. The banks are just hesitant to make loans . In these cases, the IRS may be willing to “subordinate” its lien to the interests of the bank in order to let the sale go through. Often, a taxpayer’s means of survival is threatened by the filing of a lien. In California, doctors, real estate agents and insurance salespersons are unable to hold licenses to do business if there is an IRS lien on the record.

In both the above cases, applications must be filed, time periods will pass, records must be provided, appeals must be made (more often than not), subsequent installment plans must be entered into and notifications must be sent out, all deadline based and in line with proper procedures. This is a difficult process and definitely merits hiring a tax professional, preferably a tax attorney acquainted with the procedures and able to make the process move smoothly, to the benefit of both the taxpayer and the underpaid bureaucrat handling your case for the IRS. Where is there a tax lien on my credit or on my house?  IRS liens are filed at the County Recorder’s office in the county where a liened property is or, if a general lien, in the county in which the taxpayer resides. As public record, credit agencies can see this and your credit report will be affected.  Any individual can access this information if the have the know-how. How do I find out? The IRS will send you a Notice of Intention to file Federal Tax Lien. It will then wait 30 days before sending you a Notice of Filing of Federal Tax Lien. With each of these you will receive a Collections Due Process appeal form. Should a lien be filed against you, it is very likely you will begin to receive solicitations in the mail or by phone. You may also become the subject to numerous tax scams. Please know that he IRS will never call you and threaten you with collection efforts or criminal action. They use the US Postal Service. In the alternative, you can always call the IRS at 1 800 829 1040 and ask or go to their web site at irs.gov.