Tax Lien — The Ins and Outs of this Pesky Tax Issue

I must get all the interesting problems a client can have. A few weeks ago, a long-time client and friend, tried to sell a parcel of land that was held in a defunct corporation. To his surprise, there was no clean title to the parcel as there was a lien upon it.

A lien is placed upon property or assets if taxes are owed over $10,000 to the IRS; a state agency can also place a lien on property or assets if taxes are owed, returns have not been filed, or a combination of the two.

In this case, the corporation never properly dissolved — no “final” tax return was filed, and so the state placed a lien upon the property as non-filing penalties and interest had accrued. The client stated they were unaware of any liens. As a rule for both federal and state, a lien letter or notice will be mailed to the last known address for the taxpayer (in this case the corporation) with a timeline and steps to take to remove the lien.

Releasing a Federal Tax Lien

If you had an asset with a Federal Tax Lien, the Treasury Department/Internal Revenue Service will file the lien with the courthouse in the taxpayer’s jurisdiction. A former client discovered upon his father’s death that he could not sell the property that was already “sold” but not closed due to a clear title not being present. What a shock to the son, but luckily he had an Enrolled Agent who knew what needed to be done to release the lien.

Releasing a lien is not like calling the IRS or simply filing a return. Sometimes it can take as little time as a month when working with a Revenue Officer or longer, as each situation is different. Can you do this yourself? Yes, but I don’t recommend it — if the forms or requests are not completed correctly, you will be stuck until such time as everything gets released by the IRS.

Bottom line: OPEN THE MAIL

Leaving mail unopened in hopes that the problem magically goes away is not smart. In the above example, the IRS and the bank had to fight over the proceeds with the IRS coming out on top in order for the sale could go through.

Find a licensed professional to help with a lien release. Enrolled Agents are always a good source as we are very familiar with the Internal Revenue codes and processes.

Need help getting a lien resolved? Reach out today.

Call Us