What Is An IRS Tax Lien and How To Remove It

A federal tax lien is the government’s legal claim against your property when you fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets.

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Chapters:
0:00 – Intro
0:32 – Types of Liens
0:36– Secret Lien
0:54 – Recorded Lien
1:31 – Collection Due Process Rights
2:09 – Subordination
2:32 – Discharge
2:50 – Withdrawal
2:58 – Lien Release
3:25 – Outro

A tax lien is a lien imposed on real property and assets of a taxpayer by operation of law.

There are generally 2 types of federal tax liens:
1) The Secret Lien, and
2) The recorded lien

The secret lien takes effect upon notice and demand, where the IRS sends their demand for payment and it is not met.
It is “secret” in the sense that it is not public. What it operationally does is encumber the taxpayer’s property.

The recorded lien is a lien filed publicly, normally in the courthouse in the jurisdiction where the taxpayer resides. It puts other creditors on notice of the liability and puts the IRS in line to collect, generally in the order the lien was filed.

A lien should not be confused with a levy, the taking of property, which is another tool in the IRS enforcement toolbelt which will be discussed another time.

The IRS must send the taxpayer a notice of federal tax lien within 5 days of filing. While that notice comes out AFTER the lien has already been filed, watch for that notice, it carries collection due process rights (CDP) to appeal the lien filing and offer a collection alternative, or in some limited circumstances, to challenge the underlying liability.

If a lien filing will be truly detrimental, there are ways to work with the IRS to hold off the filing, but don’t wait until the lien is filed to deal with the issue. Contact a tax professional early to avoid the lien filing.
Lastly, there are a few different ways to remove a lien. We will briefly discuss the most common.

Subordination – when refinancing, the bank typically wants to be in first place ahead of the IRS, so you ask the IRS to subordinate.
Discharge – – when selling property and buyer wants clean title. IRS will typically take the net proceeds. There is a formal process to request this. Do not wait until the week of closing to request this.
Withdrawal – ex. erroneous
Release – ex. When debt is satisfied

I will leave you with a last important tip when dealing with IRS collections enforcement – never shift funds around solely to avoid payment to the IRS. By taking that action, you can change a case from civil enforcement to a criminal tax evasion case.

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Frost Law is comprised of skilled tax attorneys, business attorneys, litigation attorneys, estates attorneys, Certified Public Accountants, Certified Financial Planners, and other tax professionals. We have been serving clients across the country and abroad.

We have office locations on the East Coast in Maryland, Virginia, Washington, D.C., Pennsylvania, Florida and serve clients internationally.
DISCLAIMER: This video is not legal, tax, or financial advice. Talk with a professional about your situation before making any legal or financial decisions. These videos also do not create attorney-client privilege.

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The post What Is An IRS Tax Lien and How To Remove It first appeared on How To Profit With Tax Lien Certificates.

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