Since I am a Mississippi tax attorney and my firm deals in civil and criminal taxpayer representation before the IRS and Mississippi Department of Revenue, a state or federal tax lien is something we deal with routinely. In fact, the majority of our clients do not find us until an IRS tax lien has been filed. Unfortunately, this means a large number of our clients are trying to sell the property to resolve their tax issues. Many also find the process may not be as simple as they first believe. But, the reality is, the IRS and/or Mississippi Department of Revenue will be more than happy to allow the house or property to be sold. The catch, the IRS or DOR wants to walk away with the money from the sale to apply against your tax debt, which was secured by the tax lien.
So, assume the taxpayer owes the IRS $75,000, the home is worth $300,000, and the IRS has filed a tax lien against the house.
For example, you sell your home, and you currently owe the bank $75,000. This would allow the IRS or MS DOR to get paid in full. The house would sell, the first $75,000 would go to the bank, the next $75,000 would go to the IRS to resolve the tax debt, and any remaining funds would be paid over to you.
What if there is no equity?
Then the IRS will still allow the sale, assuming this is a legitimate sale, but the IRS will require documentation of the sale (appraisal, contract, closing statement, etc.), assuming all this is prepared and submitted properly, then the IRS should release their tax lien and allow the buyer to receive a clear title. If there is nothing to collect over the mortgage amount, then despite the IRS tax lien, the IRS should allow the sale.
If the IRS will be partially paid on the tax debt, then it is critical to work out the transaction ahead of time with the IRS technical Advisory Group, also known as the IRS “lien unit” before closing.
If you know you, or your client, are planning to sell a property with an IRS tax lien, you should get a tax attorney involved as soon as possible. As with most things, the IRS can be slow-moving and take several weeks to get worked out. So it is imperative to get started early. Since our fees can be paid out of the closing proceeds, there likely isn’t any upfront cost to hire a tax attorney.
These are issues we deal with routinely, if you have any questions about IRS tax liens or any other IRS debt related issue, please feel free us at 601-957-9672 or find us online at www.DamiensLaw.com.
Joseph Damiens, Esq., LL.M.
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