HOW IRS LIENS WORK - Tax Liens Series #1 August 2022

This is an overview:
1) Tax return is filed with a balance due
2) IRS “assesses” or bills the tax to the taxpayer
3) A “Billing Notice” is sent requesting payment
Ten (10) days after the date of the “Billing Notice”, a “silent lien” arises automatically by law if the balance is still unpaid
A “silent lien” means that the taxpayer is not notified
Liens are filed against a taxpayer’s SSN, in the town or county where a taxpayer resides, has a business or investment rental property
Liens “attach” to a taxpayer’s assets, both current and future, until the debt is paid, but they aren’t “placed on” the assets themselves
If the taxpayer owes - $10,000 the IRS may also issue a “Notice of Federal tax Lien” or “NFTL” making other creditors aware that the taxpayer owes federal income taxes
The lien and the Notice of Lien are two separate and distinct things

My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.

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[christinekohnle]

A “subordination” is NOT necessary

After a process of fact finding while trying to purchase a home our lawyer along with an individual at the IRS gave us proof that you do not need a subordination ruling from the IRS if you have a tax lien on you as an individual.

“In 1968 the Internal Revenue Service published Revenue Ruling 68-57, which states that it is the position of the IRS that a PMM or a PMSI given in good faith to secure a loan for the purchase of real property or goods, has priority over an already recorded Notice of Federal Tax Lien.”

This information is critical if you are trying to obtain financing for real property.

Publication 785 (10-2005) Catalog Number 47474W
Revenue Ruling 68-57
Section 6321 – LIEN FOR TAXES
26 cfr 301.6321-1: Lien for Taxes Rev.Rul. 68-5

I would suggest hiring a tax attorney if only to give your lender peace of mind that they take priority if the property is sold later on or if the loan is in default. It wasn’t as expensive as we thought it would be around $1000.