If your IRS back tax problem continues for long enough, the IRS will employ one of several collection tactics in order to collect the funds owed. One of these actions is filing a Federal Tax Lien. A Federal Tax Lien marks the IRS' priority on your real and personal property against all other creditors and gives them the right to seize and sell such property, subject to prior encumbrances, in order to collect the back taxes you owe.
Prior to such seizure, the IRS must make an assessment and make demand for payment. Should the IRS choose to file a tax lien, they will notify you in advance and give you a specified date by which you must pay your back tax debt before the lien will take effect. If you don't pay within the time specified in the first notice, the IRS has the right to begin enforcement proceedings.
In fiscal year 2012, the IRS filed 707,768 Federal Tax Liens, up nearly 50% versus ten years ago when, in 2002, only 482,509 liens were filed.
The IRS/State file tax liens to protect their interests. Recorded with one or several county recorders, a tax lien basically tells the world that you owe back taxes, and is generally devastating to the taxpayer's credit. This makes it very difficult to obtain credit or to sell real estate.
The negative effect of a tax lien is that when the taxpayer fails to pay the assessment of tax, plus interest, penalties, or costs, the tax lien arises upon all property and rights to property belonging to the taxpayer, whether real or personal, tangible or intangible. Even if the taxpayer makes partial payment, a lien will arise for the balance of the tax.
Once the Federal Tax Lien is filed, the IRS will only release the lien when your back tax debt is fully satisfied. They will do this 30 days after full payment, or immediately if paid in cash or the equivalent of cash. They will also release a lien upon the posting of a cash bond or upon giving the IRS a mortgage on real property whose fair market value is twice the value of the tax debt. Both the mortgage and the bond must stipulate payment terms over an agreed upon time frame.
A Federal Tax Lien can also be withdrawn if one of the following applies:
- It was filed too soon or not in accordance with IRS regulations;
- It speeds up the actual collection process; or
- It is determined that it is in the best interest of the taxpayer and the IRS.
A taxpayer can also appeal the filing of a Federal Tax Lien. The IRS must notify you that a Federal Tax Lien has been filed within five days after the lien is filed. Some of the reasons upon which a appeal can be based include but are not limited to the following:
- The tax debt owed was paid prior to the Federal Tax Lien being filed;
- The tax was assessed and the Federal Tax Lien filed while the taxpayer was in bankruptcy;
- A procedural error was made during the assessment;
- The statute of limitations on the debt had expired before the Federal Tax Lien was filed; or
- The taxpayer was not given an opportunity to dispute the liability. If you have a Federal tax liability, and you cannot fully pay all you owe at this time, the team at the Tax Group Center may be able to help in keeping that Federal Tax Lien off the public records of your county courthouse.
How Tax Group Center Can Help …
Although the IRS/State are extremely reluctant to release or modify a tax lien, we are sometimes able to get the government to subordinate the lien to a lender, thus allowing the client to borrow money against his/her assets to satisfy all or part of the tax lien. Our professional team makes sure that the IRS/State have met all legal requirements for a legal tax lien filing. If any defects are discovered in this process, our team may immediately appeal the filing of the tax lien.
The team of Tax Attorneys, CPAs and Enrolled Agents at the Tax Group Center understands how the IRS works and deals with the collection of back tax debts. We will work through qualified tax compliance programs, and when possible, facilitate the release of a client’s Federal Tax Lien. If you have a Federal tax liability, and you cannot fully pay all you owe at this time, the team at the Tax Group Center may be able to help in keeping that Federal Tax Lien off the public records of your county courthouse. We will evaluate your unique situation and recommend the most appropriate course of action, and help you get past the stress and difficulties of your back tax problems.