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Tax Liens, Levies, and Warrants

Tax Liens & Warrants

After the IRS (i.e., the Federal Government) assesses a tax, issues a notice and demand for payment of the tax, and payment of the tax is not made, a “silent” or “secret” lien exists against the taxpayer. That means any property owned by the taxpayer is encumbered by the IRS lien and generally cannot be sold or transferred without first resolving the IRS lien. If the taxpayer improperly sells or transfers the property without resolving the IRS tax lien, the tax lien can follow the property, thereby subjecting the property to being seized by the IRS despite no longer being owned by the taxpayer. However, for the IRS lien to have priority over Bona-fide Purchasers, Holders of Security Interests, Mechanic’s Lienors and Judgment Creditors, the IRS generally must file a Notice of Federal Tax Lien (NFTL). An NFTL is a public record that is filed in the County Clerk’s Office where the taxpayer resides, and functions as notice to third parties of the IRS’s security interest in the debtor’s property.

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When an NFTL is issued, the taxpayer is provided an opportunity to dispute the IRS lien by requesting a Collection Due Process (CDP) hearing within a specified timeframe. Possible remedies to a federal tax lien filing include the lien being Withdrawn, Satisfied, Discharged, or Subordinated. The applicability of these remedies is dependent upon the facts and circumstances of the taxpayer(s) involved. While all of this might seem straightforward, it is not. Federal lien law is complex and riddled with nuances and possible pitfalls. For those who have been issued an NFTL, it is wise to consult with a competent tax resolution law firm to determine the best course of action to be taken with respect to the federal tax lien.

Like the federal tax lien, the New York State Department of Taxation and Finance (DTF) files NYS Tax Warrants against taxpayers who are delinquent with their payment of NYS tax obligations. Unlike the federal tax lien, however, there is no “silent” or “secret” lien that exists when a NYS tax liability is assessed. The NYS DTF must perfect its security interest in the property owned by a taxpayer by filing a NYS Tax Warrant as a public record in the County Clerk’s Office where the taxpayer resides. The NYS Tax Warrant is essentially a judgment filed against the taxpayer and encumbers property owned by the taxpayer including but not limited to Real Estate.

Since both NFTLs and NYS Tax Warrants are public records, soon after they are filed, delinquent taxpayers are often bombarded with solicitations via mail, email, and telephone, for tax resolution services. Many of these solicitors are not locally established or licensed law firms and tend to make lofty promises to vulnerable taxpayers without first considering their particular facts and circumstances. Qualifying for any resolution to a tax problem requires financial analysis, so be wary of any solicitor that promises results without first understanding your set of facts and circumstances. If you find yourself searching for professional help with delinquent tax debt, it is a wise decision, but it is important to thoroughly research the company before hiring them and to keep in mind that if it sounds too good to be true, it probably is.

Tax Levies

When the IRS and/or NYS DTF issues a levy, it means they are taking something from a delinquent taxpayer. The two most common forms of tax levies are wage/income levies and bank levies. In some cases, the IRS and NYS DTF can seize and sell real estate, vehicles, and other property of a delinquent taxpayer in an attempt to satisfy the outstanding tax debt. If formal arrangements to resolve the tax debt are not made, the federal and state taxing authorities can levy a taxpayer’s property until the underlying tax debt is paid in full.

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When an NFTL is issued, the taxpayer is provided an opportunity to dispute the IRS lien by requesting a Collection Due Process (CDP) hearing within a specified timeframe. Possible remedies to a federal tax lien filing include the lien being Withdrawn, Satisfied, Discharged, or Subordinated. The applicability of these remedies is dependent upon the facts and circumstances of the taxpayer(s) involved. While all of this might seem straightforward, it is not. Federal lien law is complex and riddled with nuances and possible pitfalls. For those who have been issued an NFTL, it is wise to consult with a competent tax resolution law firm to determine the best course of action to be taken with respect to the federal tax lien.
This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.