When taxpayer’s come into our Richardson, TX tax office and have IRS Debt, IRS Liens are often the major issue they are working to resolve, either preventing a tax lien from being placed on their assets or removing an IRS Lien that exists. It’s much easier to achieve prevent one to remove one but over the next few weeks, we will cover a variety of options in dealing with IRS Tax liens, specifically related to closing real estate transactions.
What is a Tax Lien?
It is the US Government’s legal claim on your property that arises when you do not pay your taxes. The Tax must be “Assessed” and the IRS must send notices to the taxpayer prior to filing the NFTL.
How Does the Taxpayer Learn of the NFTL?
The Taxpayer will be notified of the NFTL directly from the IRS. The IRS will typically send sever notices to the Taxpayer requesting payment including the CP504 which notifies the taxpayer of the IRS right to file a lien. The IRS notifies the taxpayer of the filing by sending the “Notice of Federal Tax Lien” to the taxpayer. At this point, the lien has been filed but the IRS is giving notice.
Sometimes, the taxpayer does not receive the notice, or they don’t open their mail or understand it. During the loan process, sometimes the seller will tell the realtor of the NFTL, and sometimes the realtor is blindsided during the process when the Title Company or lender identifies the NFTL.
Where is the NFTL Filed and What is the Impact?
The Notice of Federal Tax Lien is a notice filed at the county/state level of the taxpayer. It is no longer reported by credit reporting agencies. The NFTL tells the world of the IRS Debt and the priority of the IRS over other creditors. Typically, banks will not want to loan money on a property with an NFTL against it and it will need to be addressed before real estate transaction is completed.
In the next few weeks, we will address options available to taxpayers to prevent the NFTL, or when filed, to work with IRS to have the NFTL released, discharged, or subordinated. Each will be based on the specific circumstances.
Remember that the IRS has a right by law to file an NFTL. They understand that it creates pain to the taxpayer. To have the lien removed, the taxpayer will need to do more than simply explain that it is an inconvenience to them, but there are options to complete the sale of real estate under an NFTL, which we will cover in the next few blog posts.
Do You Need Help?
If you need help with a Tax Lien or other IRS Collection issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.