Tax Lien Procedure - Do state tax liens expire or is there a time limit on irs tax liens?
The procedures surrounding the administration of tax and tax liens over property are diverse and varied due to the existence of many State and municipal jurisdictions, along with that of the Federal government. All parties to the administration of tax, and in particular a tax lien, need to be conversant with the statutory procedures in force in the appropriate jurisdiction, and full knowledge of the rights attributable to each party is recommended to be had by all.
The various States and counties each adopt particular statutory procedures in regard to the administration of tax, but invariably these and the Federal procedure for the administration of tax, achieve the same result and have similar features.
When a tax debt accrues, in the case of Federal taxes, a delegated authority such as the Internal Revenue service is given the statutory right to apply a lien on the taxpayer’s property as security for the amount outstanding if the following procedures are observed.
Assessment and Demand Notice
The IRS must assess the liability and provide a Notice of Demand for Payment. If the amount isn’t repaid within 10 days, the IRS will file a Notice of Federal Tax Lien and this serves as public notice to all the taxpayer’s creditors that a claim lays against the property.
At this point the lien is a matter of public record the taxpayer may find their credit rating is placed in disrepute, as the lien will apply to all real property and personal property, and also future income and property. There are no monetary resources exempt from IRS tax liens, unless a court orders such an exemption, or the IRS exercise its discretion to favor the tax payer.
How to Get Out of It
However, if the amount is satisfied in full, along with all interest, fees and charges, or if an agreement has been reached with the tax authority and that is accepted, the lien is able to be discharged within 30 days. If not, after 10 years, and purely by the operation of statute, the lien will be released; this shows there is a time limit on IRS tax liens, and that it si indeed possible to secure the withdrawal of Federal tax liens.
Also, if the statutory procedures were not followed, if the withdrawal would facilitate the paying of the tax debt, or if the Taxpayer Advocate determines that a withdrawal would be in the best interest of the taxpayer and the government, the tax lien will be withdrawn.
An appellate procedure is available to the taxpayer, whereby they can notify the IRS within 5 days of the lien being filed, and request a Collection Due Process hearing with the Office of Appeals.
If for instance, the lien was filed when the taxpayer was in bankruptcy, if the Statute of Limitations prevents the filing of the lien, if there is a wish to make spousal defenses, or even if there is a desire to discuss repayment options, the Office of Appeal will consider the case.
After a decision has been reached in the hearing, if it is found that the lien should remain in place, the taxpayer has a period of 30 days in which to request a judicial review in Court.
Numerous other opportunities exist for the taxpayer to contest the procedure followed by the tax authority in the institution of the lien, however, if the lien is legitimately placed upon a property, the tax authority may decide to sell the rights to collection of the amount owing on the lien to a third party. Alternatively, the tax authority may decide to sell the property in order to recoup the amount owing.
If a tax lien is sold to a third party, the taxpayer is obliged, along with the principle debt, to pay all fees, charges and interest applicable to the principle debt, to the holder of the lien, but has a period of redemption to satisfy the debt in full. After this period expires, the lien holder is able to foreclose on the property and acquire title to it.
The advantage to the taxpayer in this instance is that they are able to communicate with the holder of the lien, and persuade the holder to refrain from foreclosure. Particularly if regular repayments are being made, the interest return on the lien holder’s investment may be attractive to such an extent that foreclosure may be avoided.
State tax liens do expire, and the taxpayer needs to consider the instance of where the outstanding tax debt is larger than, or equal to the value of the property itself. In these circumstances, it may well be that the most prudent course of action is to allow foreclosure. Otherwise, any repayments would be funding a debt that may never actually show signs of reducing, which of course should be the focus of any repayment strategy.
In this turn of events, the determinative factor is the state of the property market, which could fluctuate to levels where the decision needs to be reconsidered at regular intervals.
Thomas Tool Services v Town of Croydon 97-887 N.H. 2000
Barazandeh, Darius The Benefits of Tax Deeds in Texas
Salerno, Thomas J., & Kroop Jordan A., Bankruptcy Litigation and Practice: A Practitioner’s Guide Aspen Publisher’s