A Federal Tax Lien (FTL) is a legal instrument that secures the claim of the United States in the right, title, and interest of a debtor taxpayer's assets. It is a public document and is recorded at the County Clerk's office or the Secretary of State, depending on local law. This is done to serve notice on all creditors or other interested parties of the government's claim.
The Federal Tax Lien is a negative item on the credit bureau report of the debtor. It may result in some creditors calling in their notes upon becoming aware of the FTL.
The FTL generally becomes the most senior claim against the debtor's assets with the exception of first mortgage holders who have properly filed financing documents. The Federal Tax Lien may also displace the primary security position of factoring firms lending on accounts receivable and bank revolving lines of credit 45 days after filing (each situation is unique and must be considered on individual circumstances). Certain claims may trump an FTL such as legitimate mechanic's liens, local taxes, and perfected landlord liens.
In some jurisdictions, local law provides for separate filing of liens for real property and personal property. In that case, the IRS will file two identical liens, one under personal property records and one under real property records. Failure to file both could result in the government's claim not being perfected on all assets. If the debtor is a corporation, failure to file at the Secretary of State may also result in an imperfect claim depending on local law.
The FTL is the basis for IRS legal authority to foreclose on debtor assets by conducting a seizure. Since the IRS Reform Act of 1998, seizures by IRS Revenue Officers have dropped dramatically. The lien is not to be confused with an IRS levy. The IRS can levy on a debtor taxpayer's bank accounts or wages without a FTL. IRS only needs a valid assessment and must have served legal notice in the form of a certified mail letter to the debtor's last known address 30 days prior to levy. However, often the IRS has filed an FTL before levy action even though it is not required.
If not filed, a FTL can be avoided by entering into an Installment Payment Agreement with IRS in most cases. Once filed; absent special circumstances, it is not released until the debt is satisfied. One may negotiate with IRS to subrogate the federal lien to another debt if it is in the mutual interest of the government and the debtor taxpayer. A lien may also be discharged from a specific property if IRS approves and gets proper financial consideration. Normally, only if the FTL is paid in full, the statute of limitations expires, or IRS agrees to an Offer-in-Compromise and is paid a settlement; will the FTL be released.
One can appeal the filing of a FTL but they must have a good case to overturn one. If you can show that the FTL will actually hurt the ability of the government to recover payment or that the tax assessment is incorrect, there is a chance of succeeding.
Hire a good Certified Public Accountant (CPA), Enrolled Agent (EA), or Tax Attorney if you need IRS help. If you cannot afford professional assistance, the IRS does have help in the form of the Taxpayer Advocate's Office. The help is hard to get because you have to go through some "red tape." But if you try hard, they might work with you.
James Robert Coleman, E.A., A.T.A.
Enrolled Agent & Accredited Tax Advisor
http://www.exirsman.com
Member: National Association of Enrolled Agents
Former IRS Revenue Officer, GS-11
As your business grows, you are going to need help.... Read More
If your identity is stolen, your finances can quickly become... Read More
Recently, I stumbled across a concept that could change your... Read More
Once a year Canadian taxpayers are required, by law, to... Read More
Haven't done your taxes yet? No problem. Now there is... Read More
As tax time approaches, many home-based business owners begin completing... Read More
A Federal Tax Lien (FTL) is a legal instrument that... Read More
1812The first attempt to impose an income tax on America... Read More
Six Urban Myths ? Taxation"I am proud to be paying... Read More
IRS Tax forms can be confusing.Am I a 1099 or... Read More
Just image, you are a small manufacturing company, business has... Read More
Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax... Read More
Does this scene sound familiar? It's April 7. You haven't... Read More
Let's assume that you would like to begin saving for... Read More
The IRS has obtained civil injunctions against more than 100... Read More
Choosing the right tax preparer for your business is a... Read More
Beware of advertisements that claim to settle tax debts for... Read More
If your business has employees, you must pay employment taxes.... Read More
We all love to criticize the IRS, don't we? And... Read More
The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More
As teachers and students head back to school following a... Read More
Should I take wages or dividends from my privately owned... Read More
With gas prices at an all time high before Hurricane... Read More
Most people trying to make a crust online (or offline... Read More
Media reporting of a new EU savings tax directive has... Read More
In trying to comply with tax laws for your e-business,... Read More
Marketing is a necessary expense in running practically any business... Read More
The federal tax code is complex. This complexity generally arises... Read More
All tax authorities to e-commerce transactions should investigate the record... Read More
Own residential rental properties? This article discusses how income from... Read More
In the latest Star Wars episode, the evil empire executes... Read More
Deduction of Refinance PointsAny points that you pay in the... Read More
Each year, the IRS lists various scams taxpayers get caught... Read More
"What we've got here is a failure to communicate." ... Read More
Millions of people file tax return extensions every year. The... Read More
When buying a business, how the "purchase price" is made... Read More
We need real tax reform and we need it now.... Read More
Let's assume that you would like to begin saving for... Read More
If you are a Small Business Owner or Self-Employed Person,... Read More
Import duties continue to be significant elements in the cost... Read More
Practically every small business has receivables that it cannot obtain... Read More
Newlyweds and the recently divorced should make sure that names... Read More
As a small business owner, it's wise to familiarize yourself... Read More
You're at your office, or home, and the doorbell rings... Read More
Over 50% of marriages end in divorce in the United... Read More
Following is a reproduction of the IRS's rules and requirements... Read More
If your business has employees, you must pay employment taxes.... Read More
Haven't done your taxes yet? No problem. Now there is... Read More
Do you realize that some tax forms ask you to... Read More
April 15th looms in front of most people every year... Read More
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More
If your like many, you don't always understand what people... Read More
If your identity is stolen, your finances can quickly become... Read More
The electronic transaction ordinance defines the certificated copies in which... Read More
Managing a business small, medium or big requires you to... Read More
As everyone in the U.S. knows, we have just passed... Read More
No one likes paying tax. Everyone understands that tax is... Read More
So, you were pleasantly surprised to learn that you are... Read More
An early distribution from an Individual Retirement Arrangement (IRA) or... Read More
How about a Tax Tip?As we all know Taxes are... Read More
If you have recently started an Internet or home business,... Read More
One of the most important, but least understood or appreciated... Read More
As teachers and students head back to school following a... Read More
If you have employees, you are responsible for paying a... Read More
Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More
It's that time again, the April 15 tax deadline is... Read More
Tax |