Title Trouble? “Lean” on JK Harris

Kelly Scott EA, CPLP /Director – Training & Customer Service

One of the most common things we hear from our customers is, “The IRS put a lien on my home!” This is often followed by, “Can you get it taken off?” The answer to this question is not always a simple one.

First, what is a lien exactly? A federal tax lien is a way for the government to secure their legal claim to interest in your property or rights to property. The IRS’ point of view is that when you owe taxes, you have in fact “borrowed” funds from the United States, and therefore the U.S. is entitled to certain methods of ensuring repayment of that debt. A lien is not just attached to your home, but rather to your Social Security Number. In this manner, it actually attaches to everything you own, and to everything you purchase while the lien is still in place. It is only released or removed when the tax debt has been resolved.

A statutory or “silent” tax lien is automatically in place any time the IRS makes a demand for payment (by sending a collection notice) and payment in full is not made. However, formal notification and public filing of a lien generally does not occur until the debt is more than $10,000. A lien cannot be publicly filed if the taxpayer has not been sent a final notice…but be forewarned, the notice must be sent. This does not guarantee that you actually received it!

Now, all of this sounds pretty scary, doesn’t it? But what does the lien actually do? The lien itself doesn’t have any actual affect on you unless you are applying for credit, or attempting to sell a piece of property. For most taxpayers, the lien will just stay in place as a silent reminder of the tax debt until the debt is paid (or settled) and the lien is satisfied. In rare cases, a lien may prevent someone from gaining employment, or earning income. For example, a general contractor who is in the business of purchasing and reselling property would have difficulty earning an income if a lien attached to every piece of property he bought. In these cases, JK Harris can try to prove to the IRS that the lien is causing a severe economic hardship, and discuss resolution options.

What else can be done about liens?

-If a lien is filed by mistake, IRS will withdraw the lien once the error is proven.

-IRS will discharge certain property from the lien if they are paid the taxpayer’s equity in the property. A discharge of lien is usually requested when a taxpayer wants to sell a specific piece of property and turn the profit over to IRS.

-If a taxpayer needs to borrow money to pay on a tax liability, IRS may subordinate its lien to allow another creditor (i.e. the mortgage company) to take priority. However, the IRS must receive the proceeds (or portion of the proceeds) of the loan.

Resolving lien problems and their far-reaching effects can be a confusing and complicated process, but we at JK Harris help our customers with these issues every single day. We are not a law firm, and sometimes a lien situation will require referral to a tax attorney. However, if a tax lien has complicated your life, we encourage you to give us a call first so we can see what we can do to help.