If you are attempting a home refinancing with a lien, this may prove to be a good article to get you oriented to the fundamentals of what might happen.
100s of thousands of people receive an IRS lien each year and you are definitely not alone.
An IRS insider who worked for the IRS for many decades, gathered and wrote the information presented here.
A Notice of Federal Tax Lien is a document that the IRS files with the local recording offices that identifies tax liabilities owed by the taxpayer.
In order to understand the Notice of Federal Tax Lien you must do the following:
A Notice of Federal Tax Lien, once satisfied, will take up to 30 days for to be released.
The first step in stopping a Federal Tax Lien is to determine if there is an amount due to the IRS. If there is, you should request a payoff letter. This letter will give you an accurate picture of the the amount of tax debt, including penalties and interest.
If there’s a third party such as tax representative working on your behalf, then you must submit the request in writing accompanied by a properly completed Form 8821, Tax Information Authorization, signed by the taxpayer. Without a Form 8821, the IRS cannot disclose taxpayer information to third parties. (see attached for 8821) https://www.irs.gov/pub/irs-pdf/f8821.pdf
If you have paid the taxes owed, enclose a copy of any of the following with your request.
According to Section 6325(a) of the Internal Revenue Code, it states: “A Federal Tax Lien can be released within 30 days of when the liability is fully paid or becomes legally unenforceable or the IRS accepts a bond for payment of the liability”.
At the time that you have fully paid the liability, the IRS will stop the Lien and issue a Certificate of Release for filing to the office where it was filed (same location).
You should receive a Certificate of Release within 30 days. If you don’t receive the Certificate of Release, you can call the Centralized Lien Operation (800-913-6050) to check the status of the certificate. (see Publication for additional information.
If you owe no taxes and have filed all your returns timely there should be no Federal Tax Lien
Please read more information about Tax Liens below.
Payoff letters can be requested by phone at:
Payoff letters may be requested via mail from:
"A Notice of Federal Tax Lien is a document that the IRS files with the local recording offices that identifies tax liabilities owed by the taxpayer.
A Federal Tax Lien establishes priority rights against certain other creditors. If the taxpayer owes money to other creditors, they may also hold liens or secured rights against a taxpayer's assets."
For further information please review the publication 1468 by clicking this link
A federal tax lien exists after: The IRS puts your balance due on the books (assesses your liability) and sends you a bill that explains how much you owe (Notice and Demand for Payment); and you totally neglect the notice or refuse to fully pay the debt when you file your return.
You can also review Publication 594, The IRS Collection Process (PDF).
In order to understand the Notice of Federal Tax Lien you must do the following:
Don't PANIC, be calm when you receive a letter from the IRS.
Follow the instructions specific to the letter received.
The actions are simple:
The IRS will issue a Certificate of Release of the Notice of Federal Tax Lien no later than 30 days after:
You have satisfied the tax liability including tax, penalty, interest and other fees that a recording office charges to file and release the lien or, the IRS accepts a bond guaranteeing payment of the debt.
The above are the only 2 conditions that you must meet for the IRS to release the Notice of Federal Tax Lien.
The only reason why you would receive a Notice of Federal Tax Lien is because you neglected or refused to pay a balance due on your return(s).
At this time the tax against you has already been assessed and it is showing on their books and there is nothing they can do unless you pay the balance due.
Many times, a taxpayer is so busy and receives so many letters in the mail that they overlook the one that comes from the IRS. But in order to be compliant every taxpayer must follow the filing requirements which are:
The letter gives you 10 days from the date of the letter to respond and send in your payment of the taxes due. If you cannot pay, you should contact the IRS phone number on the letter requesting an installment agreement.
The assistor will prepare the installment agreement which allows you a specific amount (determined by you) which you will pay each month. You can always continue sending the same amount each month or pay in full.
If you pay in full the balance on your account, this will eliminate any further interest and penalties and your account will be closed. You can also prepare the installment agreement and attach it to the tax return.
Here's a copy of the installment agreement form 9465. You can print it, complete it and attach it to your tax return.
There are specific guidelines you must follow if you know you paid your taxes on time as follows: Immediately contact the person on the Notice of Federal Tax Lien and inform them that you have filed all tax returns and paid the balances due.
Bring a copy of all tax returns filed as proof of filing and bank statement or receipt showing payment of taxes. Once they review your file and certify that all balance dues have been fully paid, they will commence within 30 days the release of the Notice of Federal Tax Lien.
Let's suppose you had not filed any returns and paid any taxes due, and you get a Notice of Federal Tax Lien and you ignore the letter, what do you think could happen?
Remember, the Notice of Federal Tax Lien has priority rights against certain other creditors. If the taxpayer owes money to other creditors, they may also hold liens or secured rights against a taxpayer's assets.
That means they can take your property (house if you own one), your car and any other possessions you own that can pay off the debt you have with the IRS.
By avoiding paying the tax you owe when you filed your tax return, the Notice of Federal Tax Lien will be the next action the IRS will take.
The IRS will send you:
The 1st contact letter advising you that you haven't paid your taxes and they send you an envelope with instructions on what to send back to them
A 2nd contact letter will be sent again to your address of record if there is no response from you.
*Remember if you move any time after you file your return, you should notify the IRS of your new address by completing a Form 8822.
A 3rd and final contact letter will be sent to the address of record.
This gives the taxpayer three opportunities to either call the IRS or respond to the final notice and send payment in the envelope they have enclosed with the letter.
It is imperative that the taxpayer responds to the first contact letter, but maybe, due to circumstances beyond their control, they couldn't respond, and this has caused the Notice of Federal Tax Lien to be filed.
You can do this! You don't have to run out and hire an accountant or a lawyer.
However, it may be wise for you to seek assistance from an experienced IRS tax relief professional to help you understand your options and put together an action plan to resolve your tax problem.
Many taxpayers panic when they receive a letter from the IRS and what do they do? They leave the letter and never open it for months until they get another letter.
They panic and say, "Oh my, I'm going to jail, or what should I do now?" The best solution they can think of was moving to another state and never change their address because they were afraid of the IRS.
But long ignored letters from the IRS don't go away -- they go anywhere you go. Your new address will be updated once you file your next tax return and that will begin the process again.
New letters will be issued to bring you current in all your filings.
Important steps to follow: Never leave a letter from the IRS or any federal agency unopened. You may be surprised someday when you receive a check from the IRS that was redirected to your new home address. Miracles do happen.
While the IRS does engage in collection action, they also from time to time send along good news that you want to know about as soon as possible!
For individuals with a serious amount of tax debt, it's important to consider the services of a tax relief professional who can provide immediate asssistance
To review your tax debt relief options: Get a free tax debt evaluation at no obligation.