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Federal Or State Tax Lien

Did you receive an IRS Letter Notice of Federal Tax Lien?

What does such a letter mean? The IRS Letter 3172 Notice of Federal Tax Lien tells you that you have an outstanding federal tax that is owed and that the IRS has filed an IRS Form 668(Y) Federal Tax Lien with either your local courthouse or local county records office instructing local authorities to place a federal tax lien on any real property and other property you own up to the amount of the federal tax owed! What this means is that if you attempt to sell or otherwise transfer your real property or other property the IRS will receive the sales proceeds up to the amount of the federal taxes owed, rather than the money or proceeds from the sale going to you or to whomever you attempted to transfer the property!

The IRS Letter 3172 Notice of Federal Tax lien also tells you that you have the right to appeal the Federal Tax Lien filing, BUT you only have 30 days from the late on the letter to file your appeal, or you will lose your appeal rights, and therefore, time is of the essence!

How can you get rid of a Federal Tax Lien, if you are unable to pay off the amount of the federal tax in full? You could file an IRS Form 14135 Application for Certificate of Discharge of Federal Tax Lien, provided you have a reason for the discharge that the IRS could accept.

Under Internal Revenue Code (IRC) Section 6325(b)(1) if you want to have the Federal Tax Lien removed from a particular piece of real property that you want to sell AND you have other properties subject to the Federal Tax Lien valued at an amount that is equal to at least twice the amount of the federal tax lien amount then the IRS might agree to remove the federal tax lien from the specific piece of real property that you want to sell.

Under IRC Section 6325(b)(2)(A) the IRS might agree to release the Federal Tax Lien in exchange for a payment to the IRS that is less than the amount of the tax lien but that is at least equal to the amount of the interest the federal government has in the property. For example, if your tax balance is $120,000 but the fair market value of the property is $100,000 and the claims that are senior to the Federal Tax Lien equals $50,000 then the IRS may agree to release the Federal Tax Lien in exchange for a payment to the IRS of $50,000 ($100,000 less the $50,000 senior claims).

Under IRC Section 6325(b)(2)(b) the federal government may agree to remove the Federal Tax Lien when the government’s interest in the property is worthless. For example, if the fair market value of the property is $100,000 but the amount of the liens in the property that are senior to the Federal Tax Lien are $120,000 then because the taxpayer’s property value is underwater, the IRS might agree to remove the Federal Tax Lien.

Under IRC Section 6325(b)(3) the IRS might agree to remove the Federal Tax Lien and allow the sale of the property if you can submit to the IRS an Escrow proposal under which after the liens that are senior to the Federal Tax Lien will be paid from the proceeds from the sale the IRS will be paid the federal tax owed per the Federal Tax Lien from the sale proceeds before the liens that are junior to the Federal Tax Lien being paid from the sale proceeds.

The IRS could also grant an IRS Form 14135 Application for Certificate of Discharge of federal tax Lien if the IRS agrees to Lien Subordination in which the IRS will agree to allow liens that are junior to the Federal Tax Lien to move ahead of the Federal Tax Lien, such as in a case where the taxpayer is trying to refinance his or her home mortgage to avoid foreclosure, but Federal Lien Subordination is extremely complicated and time-consuming, such that the vast majority of taxpayers need to hire a tax expert experienced in Federal Lien Subordination if a taxpayer wants to go this route.

However, if a taxpayer can pay down his or her federal income tax balance to under $25,000 and enter into a 60 Month Direct Debit IRS Installment Agreement then after the IRS has successfully withdrawn three consecutive monthly IRS Installment Agreement Payments electronically from the taxpayer’s bank account then rather than preparing and filing an IRS Form 14135 Application for Certificate of Discharge of Federal Tax Lien the taxpayer could instead file an IRS Form 12277 Application for the Withdrawal of Filed IRS Form 668(Y) Notice of Federal Tax Lien, according to IRC Section 6323(i).

What about a State Tax Lien?

What if you have a state tax lien? Each state has its own rules and procedures regarding the removal of a state tax lien and offers fewer resolutions than the IRS. For example, the California Franchise Tax Board, like the IRS, does provide for the removal of a state tax lien under a California Franchise Tax Board Installment Agreement if you can reduce your state tax balance to under $25,000. The California Franchise Tax Board may allow for the removal of a state tax lien if a taxpayer qualified for a California Franchise Tax Board Offer in Compromise, or if the taxpayer is in federal bankruptcy court and the state tax qualifies for discharge under the federal bankruptcy rules and procedures.

How to get help for Tax Lien Removal?

Do you need help in dealing with an IRS Letter 3172 Notice of Federal Tax Lien or with the timely preparation and filing of an Appeal of Filing of IRS Form 668(Y) Filing of Federal Tax Lien, or with the preparation and filing of either IRS Form 14135 Application for Certificate of Discharge of Federal Tax Lien or IRS Form 12277 Application for the Withdrawal of Filed IRS Form 668(Y) Notice of Federal Tax Lien, or with a state tax lien? We can help!

Coast One Tax Group is a group of attorneys, accountants, and Enrolled Agents with over ten years of experience in releasing and removing federal and state tax liens. The attorneys, accountants, and Enrolled Agents at Coast One Tax Group can help you to negotiate with the IRS or the state to resolve your federal or state tax issue! Call, text, or email us today to find out how we can help you!

Failing to pay your federal taxes in a timely manner can result in serious repercussions.  The IRS could impose collection actions in the form of a federal tax lien.  If you’re at risk of incurring a federal tax lien due to unpaid tax liabilities and tax bills, it’s important to understand what a tax lien is and how you can resolve your tax lien problem with the assistance of a tax professional

A tax lien refers to a legal claim to a person’s or a businesses’ real estate or personal property, that can be filed by a government body or the Internal Revenue Service when a person fails to pay one of a range of taxes, such as income tax, estate tax, or taxes on belongings. If payments are not imminent when the taxpayer receives a Notice and Demand for Payment, the next course of action imposed by the government could be placing a tax lien against your property. Such claims can be imposed by either the state or federal government.  If a person attempts to sell the property, the sales proceeds, up to the amount of the tax listed on the tax lien, will be sent to the government.

What Is A State Tax Lien?

As the name suggests, a state tax lien is implemented by the state government, enabling the state government to exercise a legal right over the property of the taxpayer, with the aim of securing the tax that is owed. Before this action is taken, a Notice of State Tax Lien is issued. Depending on the assets owned by the defaulter, the tax lien can apply to real estate or personal property. The lien remains on the property in question until an appropriate resolution is reached and owed taxes have been settled. 

Before the issuance of either the Notice of Federal Tax Lien or the Notice of State Tax Lien, a series of steps will be taken by the government. Firstly, a Notice of Assessed Tax or a Bill for Taxes Due or a Final Bill for Taxes Due will be sent to the taxpayer. The individual will be given a waiting period, in most cases usually approximately 35 days, to settle the tax liability, or make  an arrangement to pay the tax before the Notice of Federal Tax Lien or Notice of State Lien is issued. 

How to get it removed?

A tax lien is the first step the IRS or state taxing authority takes to recover back taxes. Once a tax levy is imposed, the government can potentially freeze bank accounts, seize property and assets, as well as garnish wages.  Fortunately, there are several methods of removing a federal or state tax lien. 

Firstly, states impose limitations on how long a lien is valid. As the rules vary widely by state, speaking to a tax professional is extremely important when trying to avoid wage garnishments or property seizures. 

Secondly, although a taxpayer can negotiate with the IRS or state government on his or her own, with the purpose of discussing the possibility of settling unpaid taxes, a tax professional can be of great assistance to you in reaching a more favorable settlement with the government through the arbitration, mediation, or informal discussions processes. 

Coast One Tax Group – Your tax defense team

Coast One Tax Group supports individual taxpayers, small businesses, and corporations in resolving tax lien and tax levy problems.  Whether the lien is imposed by the state or federal government, we have the best team available, with years of experience, to help you to protect your assets. 

A Federal or State tax liens is the first step in seizing property and funds. One can lose personal property and wages once a tax lien turns into a levy. If the IRS or state government notifies you of a tax lien, you must act immediately. 

Contact us at Coast One Tax Group to discuss your situation and details of your state tax lien. Our team of tax experts are ready to help you deal with your tax issues with the smoothest methods possible.