When taxpayer’s come into our Richardson, TX tax office and have IRS Debt, IRS Liens are often the major issue they are working to resolve, either preventing a tax lien from being placed on their assets or removing an IRS Lien that exists. Over the past few weeks, we have given an overview of the IRS Tax Lien , as well as how to prevent the filing of an IRS Notice of Federal Tax Lien (NFTL). Today, we will cover ways to finish a real estate deal if an NFTL has been filed.
Is the NFTL Valid?
First determine if the NFTL is valid. It may be invalid for a variety of reasons including:
- It is not the correct taxpayer. The IRS does on occasion file NFTL’s in error.
- The Taxpayer’s name is not correct.
- The Social Security number is incorrect.
- The NFTL is filed in the wrong county.
- Other errors or problems that make the NFTL invalid.
You Can Satisfy the Debt
The Taxpayer can satisfy the tax debt and have the NFTL released by paying it in full or through the successful execution of an Offer-In-Compromise. The seller can also request that the IRS release the debt by remitting to the IRS at closing the amount of the tax debt owed or the amount available at closing if less than the full amount of the debt.
What if the Sale Doesn’t Fully Pay Down the IRS Debt?
If less than the full amount is available, the IRS will need to give approval to complete the transaction. In most cases, the IRS will approve the sale as long as the sale is at a fair price and they are being paid any available proceeds. This even includes short sales where there is no equity available at closing.
Has the tax debt already been fully satisfied?
Was the tax debt paid in full by the taxpayer through a full payment, Installment Agreement Payments, or though a fully completed Offer in Compromise. If so, contact the appropriate area of the IRS to have the NFTL released.
Has the IRS Collection Statute Expiration Date (CSED) Expired?
The IRS has only 10 years from the Assessment of the tax to collect the tax from the taxpayer. After 10 years, the NFTL self-releases. Has the Statute Expired? If needed, the taxpayer can request that the IRS formally release the debt but it should not be necessary. Be careful here in that there are certain situations where the taxpayer may have taken an actually that will extend the 10 year CSED.
The Earlier the Better
The seller of the home should notify their realtor as early as possible if there is an NFTL on the property. Having a tax lien released, withdrawn, or getting IRS approval for closing may take weeks or months. The sooner the issue is addressed, the soon a solution can be achieved.
Over the next few weeks, we’ll continue to dig further into this topic and explore options to deal with IRS liens.
Do You Need Help?
If you need help with a Tax Lien or other IRS Collection issue, I’d be happy to talk with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
