Owe the IRS? Most people don’t know that after the IRS sends you a letter to pay and you don’t pay them, it automatically has a lien on all of your property regardless of whether it is real estate (for example your home) or personal property (for example your car). Not only that, but it also has a lien on your right to property, such as money left by a relative in their will to you. (26 U.S.C. §6321) This is what is sometimes called the “silent lien” that the IRS has on unpaid taxes.
Then, there is the Federal Tax Lien that most people think about. This is where the IRS files a Notice of Federal Tax Lien and sends you notice of the filing. Two things happen when a Notice of Federal Tax Lien is filed. First, it gives notice to the entire world that the IRS has a U.S. Federal Tax Lien. Its purpose is to protect the U.S. Government’s interest in your property against third parties. For example, if you are selling your house and you have a Federal Tax Lien filed against the property, the lien tells everyone else there is the lien. The filed tax lien “perfects” the tax lien which then gives it priority over other liens. So, at closing, the IRS will have priority over any subsequent creditors and gets paid usually right behind your mortgage company being paid.
How long does a Federal Tax Lien last? The tax lien lasts until it is either paid or the time to collect has expired. The IRS has ten years to collect. 26 U.S.C. §6502. What this means is that the IRS has ten years to collect from you and the Federal Tax Lien on your property – the automatic or silent one when the tax bill was not paid – is there until you either pay it or ten years have passed since the tax lien arose.
It can get worse. Suppose you are thinking about just waiting for ten years and this all goes away. Not so fast! The IRS can refer it to the Department of Justice to sue to convert the U.S. Tax Lien to a judgment. That effectively adds 20 years that the Government has to collect from you. Sometimes, it won’t seek to convert the lien to a judgment and sometimes it does.
How does the IRS get the money that is owed? It issues a levy – it takes the taxpayer’s property, either the money in a bank account or the personal or tangible property that it sells it. This is why it is important that if you owe money to the IRS, you need to take action. Hiring a tax lawyer to deal with the IRS can make a big difference. Many people wake up to the terrible feeling of their world being turned upside down when they find the IRS has cleaned out their bank account and they don’t have any money to pay their mortgage or utilities. We frequently have people call us for help when that has occurred. Better is to get help before it turns into a raging forest fire.
If you or someone you know has unpaid taxes, the IRS has a tax lien on everything you own or may own in the future. Please feel free to contact me at (317)-635-4010.
Richard J. Ebbinghouse
Ebbinghouse Law Group LLC
320 North Meridian Street, Suite 908
Indianapolis, IN 46204
Ph. (317) 635-4010
Fax (317)635-4024
rick@ebbinghouse.info
www.TheTaxSolvers.com