IRS Tax Liens Overview
How a New York Tax Lien Attorney Can Help
When the IRS cannot secure voluntary tax payments, they may use other measures to get what they are owed. A tax lien is the government’s legal claim to your property, and when the IRS places a lien on your assets, it attaches to everything—real estate, vehicles, bank accounts, and personal property.
Federal tax liens can make it hard to refinance or sell your property, but there are various ways to work around liens to address your tax debt and get back on track.
Don’t let IRS tax liens threaten your property and financial stability. The Law Offices of Stephen B. Kass, P.C. helps clients in New York and other states resolve tax liens, appeal assessments, and secure releases. Call us at 212-843-0050 to protect your assets.
Key takeaways:
- The IRS issues a federal tax lien when a taxpayer has significant tax debt.
- Tax liens give the IRS a legal stake in your assets, making it hard to sell or borrow against assets.
- There are multiple ways to handle liens, including requesting an appeal, release, subordination, or withdrawal.
- You can fill out Form 12277 to request a lien withdrawal.
- A NY tax lien attorney can help you explore lien solutions and protect your property.
When Does the IRS Assess a Tax Lien?
Before issuing a tax lien, the IRS must assess a tax liability and notify you of your obligation to pay. They are legally required to send a notice of what you owe and a demand for payment, per IRC 6321. Once you fail to respond to that demand for payment, the IRS can place a lien on your assets.
Issues Leading to a Lien
The tax lien process may start in a variety of different ways:
- Failure to pay taxes listed on tax return: In some cases, taxpayers file their tax returns but do not pay the amount they owe. The IRS may then move forward with attempting to collect the tax debt, eventually resulting in a lien.
- Substitute for return filed: When a taxpayer does not file a tax return but third parties report making payments to the taxpayer, the IRS may file a substitute for return on behalf of the taxpayer. If the taxpayer ignores continued communication attempts, a lien may be placed on their assets.
- Adjusted tax return resulting in additional tax debt: Should a taxpayer attempt to evade taxes by leaving out income sources or claiming deductions or credits they do not qualify for, the IRS may make adjustments to their tax return. This often results in tax debt that the IRS will take steps to collect.
- Offer in compromise: If there’s a lien on your property and you get an offer in compromise accepted, the IRS may keep the lien in place until the terms of your offer are satisfied.
- Installment agreement: In some cases, a taxpayer can avoid a lien by setting up an installment agreement. However, some types of installment agreements do not result in a lien being withdrawn; in these scenarios, the IRS keeps the lien in place until the installment agreement is complete. For example, if you owe over $50,000, the IRS often issues a tax lien even if you set up payments.
The IRS can issue a federal tax lien against taxpayers who owe any back taxes. But typically, the agency only issues tax liens once you owe over $10,000.
When and How to Appeal an IRS Lien
Perhaps the IRS has already taken action against you and placed a lien on your assets. There may be steps you can take to lift the lien. An appeal may be the best option for you if the lien was filed in error, is creating financial hardship, or the Collection Statute Expiration Date has already passed.
How to Appeal
The IRS offers two main paths for an appeal: a Collection Appeal Program request and a Collection Due Process (CDP) hearing request.
A Collection Appeal Program requires that you fill out Form 9423. You can request a CAP hearing even if you have not yet received a final notice. If you are still relatively early in the process, this may be a better option than waiting for the IRS to get more aggressive in their collection efforts.
If you have received a final notice, you may fill out Form 12153 to request a Collection Due Process hearing. This forum allows you to dispute the collection action being taken against you, and you may also dispute the tax liability if you haven’t had a chance to do so yet.
Important Deadlines
If you want to request a Collection Due Process hearing, you have 30 days from the date listed on your LT11 or Letter 1058 to request your hearing. You have 30 days from the date of a collection action to request a CAP hearing.
Releasing or Withdrawing a Lien
Once the IRS has placed a lien on your property, it can be very difficult to get the lien removed without paying off the tax debt. However, there are multiple ways you can handle a lien to sell or refinance your property and make it easier to pay off your tax debt.
Lien Release
The IRS may release a lien when you have either paid off your tax debt in full or the Collection Statute Expiration Date has passed and the IRS has lost its legal authority to collect taxes. The IRS will also release a lien when you have an approved offer in compromise.
Lien Withdrawal
The IRS may withdraw a lien if it finds that doing so is in the best interests of the IRS and the taxpayer. This is often the case if, for example, withdrawing the lien would allow you to sell your assets and get the money you need to pay off your tax debt. However, when you apply, you’ll need to prove that withdrawal is the best option for the IRS.
The IRS may also withdraw a lien if you have an approved installment agreement. Typically, you have to make at least three monthly payments before this can happen. Note that a withdrawal doesn’t erase the debt associated with the lien; you still owe your taxes, but the IRS has chosen to remove the NFTL from public records.
Lien Discharge
An IRS tax lien is applied to all of your assets. If you just want one asset to be removed from the lien, you may request a lien discharge. This removes the lien from the asset in question but maintains the lien against the rest of your property. They may agree to a discharge if you plan on transferring the proceeds of an asset sale to the IRS to cover your tax debt.
Subordination of Liens
The IRS’s lien against your property takes priority over other creditors’ liens, which can make it incredibly difficult for you to refinance your property or take out a loan against it. When the IRS agrees to subordination, they give up their priority placement. This does not mean the lien is cleared; it simply means that the IRS is no longer first in line to get paid. As a result, lenders may be more willing to lend you money against the property if they know that they won’t be competing against the IRS to get paid.
Selling Property With an IRS Lien
As noted earlier, a federal tax lien can make it very difficult to sell your property. However, there are steps you can take to sell property even with a lien in place. Solutions that may be available to you include:
- Pay off at closing: The IRS may agree to a sale if you use the proceeds of the sale to pay off your tax debt. Generally, the title company will collect the funds and send them to the IRS before transferring the title.
- Lien subordination: You may be able to refinance property if the IRS waives its right to priority status. This allows a lender to take higher priority than the IRS, making it easier to get loan approval. Generally, the IRS will only agree if you plan to use the funds from the re-fi to pay off your taxes.
- Lien discharge: The IRS may remove the lien from a specific piece of property to allow its sale. They will genuinely only do this if doing so makes it more likely that the debt will be paid off.
Role of an NY Tax Lien Attorney
Finding out that the IRS intends to place a lien on your assets or that an NFTL has already been filed can be incredibly stressful, and figuring out your next steps may seem overwhelming. That’s why it’s important to consider working with a tax lien attorney as early in the process as possible. This gives you more time to look into your options and attempt to avoid a lien entirely.
If a lien has already been placed on your property, a tax lien attorney can negotiate with the IRS on your behalf to have the lien released or withdrawn. Should you be interested in selling your property to get your tax debt under control, an experienced tax attorney can help you apply for lien subordination or discharge.
An appeal can help you get a lien removed or allow you to avoid a lien completely. Choose a tax attorney who can represent you during the appeals process and advocate for your best interests.
Not at the point of having a lien on your property yet? That’s the best position to be in—and a tax attorney can help you prevent a lien by addressing your tax debt early.
Alternatives to IRS Liens
The IRS would rather avoid a lien if at all possible. They prefer to have taxpayers pay off their taxes voluntarily, rather than turning to aggressive collection actions—and that’s why there are so many payment options that may help you avoid a lien.
First, look into requesting an installment agreement as soon as you realize you cannot afford to pay your tax debt in full. If you are approved and you remain compliant with your installment agreement, the IRS is less likely to escalate collection actions.
Unable to pay your tax debt in full, either in a lump sum or over time? Find out if you qualify for an offer in compromise. A reduced tax bill may allow you to get your lien released and pay off your taxes in a much shorter time frame.
Penalty abatement is another easily accessible option for many taxpayers. The higher your tax bill is, the greater your risk of a tax lien. If you are granted penalty abatement, either due to reasonable cause or first-time abatement, this can significantly decrease the amount you owe and limit the risk of a lien.
How the Law Offices of Stephen B. Kass, P.C. Can Help
At the Law Offices of Stephen B. Kass, P.C., we have helped thousands of taxpayers like you avoid liens and manage tax debt. By looking into your lien and your current tax situation, we can help determine if a lien can be appealed, withdrawn, or subordinated. If you qualify for any of these forms of relief, we’ll assist you with the necessary paperwork and documentation.
As you work through the appeals process and negotiations with the IRS, you can rest easy knowing that our experienced team will represent you through every step of the process. Our specialized experience with New York State tax liens and IRS enforcement in New York gives us the knowledge and skills needed to handle even your most complicated tax issues.
Protect Your Assets from IRS Liens
An IRS tax lien puts your property and financial future at risk. Find out how the Law Offices of Stephen B. Kass, P.C. can help you resolve tax liens, protect your assets, and find the right solution for your tax debt. Call us at 212-843-0050 or contact us online to set up a time to meet with our team.
