The Internal Revenue Service (IRS) recently announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien prevent the refinancing of mortgages or the sale of homes. I believe this is in response to a recent report to Congress by the National Taxpayer Advocate, Ms. Nina Olsen.
The filing of a Notice of Federal Tax Lien is a formal process by which the IRS makes a legal claim to property as security or payment for a tax debt. A lien serves as a public notice to other creditors that the IRS has a claim on all the taxpayer's property. Tax liens show up on a taxpayer's credit report and put notice to all potential creditors that they will not get paid until the IRS does. This effectively stops the granting of any new credit to a taxpayer by any lending institutions and occasionally can cost a taxpayer their job. I find it interesting that Congress pushes tax collection to the limit using liens, levies and seizures as their primary collection threats and when pushed too far, taxpayers push back and threaten to "throw the bums out of office" at which time they retreat behind their closed doors and "spin."
In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution's lien, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Without lien subordination, taxpayers may be unable to refinance their home loans or reduce their home loan payments. Lending institutions generally want their lien to have priority on the home being used as collateral.
According to the IRS, the lien subordination or discharge process usually takes approximately 30 days from the date on which a proper request has been submitted.
Currently, there are more than 1,000,000 federal tax liens outstanding against both real and personal property. The IRS issues more than 600,000 federal tax lien notices annually.
TaxMasters is heavily involved in assisting its clients with fending off the filing of the tax liens in the first place. When the taxpayer owes over $25,000, it is virtually impossible to stop the filing of the lien, however, when this is going to cause the taxpayer great distress, we file a "Collection Due Process Hearing Request " in a serious attempt to remove the lien. Unfortunately, this process takes several weeks and, in the meantime, the affect of the lien still is present.
Any time you receive any type of a notice from the IRS alleging any tax due for any year; it is critical that TaxMasters' clients immediately FAX the notice to 408-236-2484. We review the notice and let you know if any action needs to be taken.
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