irs tax questions preparation

IRS has filed a lien against me

Liens are different from levies. A lien is an instrument used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt(s).

A tax lien is a negative record on your credit report, severely lowering your credit score. This often makes it difficult for a taxpayer to obtain financing on an automobile or a home, get a credit card, or sign a lease. Tax Liens are public records that indicate you owe the IRS money. They are filed with the Clerk in the county where you live or where your business operates. Once a Federal Tax Lien is filed against your property you cannot sell or transfer the property without a clear title. You need to act NOW!

Liens mark the priority of IRS against other creditors and attach to all your assets as payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:

  • IRS has assessed the liability;
  • IRS has sent you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
  • You neglect or refuse to fully pay the tax debt within 10 days after IRS notifies you.

By filing notice of this lien, your creditors are publicly notified that the IRS has a claim against all your property, including property you acquire after the lien is filed.

Releasing a Lien

The IRS will issue a Release of the Notice of Federal Tax Lien:

  • Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
  • Immediately upon payment with cash or the equivalent of cash, or
  • Within 30 days after IRS accepts a bond, guaranteeing payment of the debt or
  • A mortgage is given to IRS against property that is worth twice the amount of your tax liability, or
  • Usually 10 years after a tax is assessed, a lien releases automatically if the IRS has not filed it again.

What should I do?

Download IRS Form 1450 - Request a Federal Lien Release. A lien must be released if it is fully paid or legally unenforceable. The IRS must also release when they accept a bond for payment of the taxy

You should have an Enrolled Agent, CPA, tax attorney or a Tax resolution company to represent you. You should compare pricing and note that Enrolled Agents and CPA's have the exact same practice rights before the IRS. Attorney-client privilege was extended to EA's and CPA's in the IRS Reform and Restructuring Act of 1998. Except for criminal cases, EA's and CPA's now stand on equal footing with attorneys. It is worth noting as well; EA's generally have more tax matters and training then tax attorneys in most cases.

You may try to appeal the filing of a lien. The law requires notifying you in writing not more than 5 business days after the filing of a lien. You may ask an IRS manager to review your case, and you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice. You must file your request by the date shown on your notice.

Some of the issues you may discuss include:

  • You paid all you owed before IRS filed the lien,
  • IRS assessed the tax and filed the lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
  • IRS made a procedural error in an assessment,
  • The time to collect the tax (called the statute of limitations) expired before IRS filed the lien,
  • You did not have an opportunity to dispute the assessed liability,
  • You wish to discuss the collection options, or
  • You wish to make spousal defenses

It is important to attack tax liens that are invalid. The trustee or the debtor has the power to avoid an invalid tax lien. A tax lien could be invalid if a lien is on property which is not owned by the debtor, a lien was filed during the automatic stay, a lien was recorded in the wrong county, or it was for discharged taxes now being asserted on future-acquired assets.

Time is of the essence. Do not just try to ignore this lien process. The IRS will file a lien against a business or individual when they continue to be ignored. An individual has 10 days and a business has 30 days to protest the action. You must adhere to the guidelines or you will lose your rights to protest.

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