The Process Of An IRS Tax Lien Being Refiled Illustrated
An IRS tax lien is a serious problem to face
The Tax Resolution Institute understands that the process of dealing with an IRS tax lien can be confusing and overwhelming. With our clients, a major goal is to help guide you through the process, providing IRS tax lien information so you can make intelligent decisions. For example, what happens when an IRS tax lien that should have expired because the 10 year time limit has passed is refiled by the IRS?
In this example, you had an IRS tax lien filed against you ten years ago, but no significant collection actions have been taken. Still, the IRS tax lien attached to all of the equity in your house because it is your greatest asset. The house is worth $400,000. You have had a mortgage on the house for years, and you still owe $200,000. As a result, you have $200,000 worth of equity in the house.
After the IRS tax lien was filed against you, you filed an offer in compromise with the IRS with the help of your local accountant. Unfortunately, like the vast majority of IRS offers in compromise, it was rejected. You should have worked with a tax resolution specialist from the beginning, but that is another story.
The entire process from initial inquiry to the completion of the Offer in Compromise investigation took the IRS about 18 months. As a direct result, the process of making the offer gave the IRS 18 addition months to collect against you. Even though the ten-year time limit has passed, the IRS has an additional year and a half to go after the equity in your house.
What is so confusing is when the IRS tax lien self-releases after the original 10-year collection statute expires. Despite this self-release, the IRS revenue officers still have 18 more months to pursue your house. If the IRS timely refiles the lien before the 30 day period prior to expiration passes, the IRS tax lien maintains its priority against your house. It will remain in place for the additional 18 months you owe the IRS, and collection action can be taken against your equity.
If the IRS does not refile the IRS tax lien timely, the lien loses its priority against your house, although you still owe the IRS for an additional 12 months. Their claim is unsecured and no longer has priority. For example, you could sell your house if the IRS tax lien is not refiled on time, and the IRS tax lien would not be paid at closing. Or you could put a second mortgage on the house equity as the IRS tax lien self-released and was not refiled to maintain its priority from the extended collection statute.
But what you have to know is that the IRS tax lien does not expire if the 30-day period is missed. Only the priority of payment is at risk in relation to any intervening event. If you took out a second mortgage, the IRS tax lien no longer has payment priority and would now be third in line, after your first and second mortgages. If the IRS is late on the refiling of an IRS tax lien, the IRS tax lien goes to the back of the payment line.
What the Tax Resolution Institute wants you to know is that even at the back of the line, an IRS tax lien is a serious problem to face. Moreover, if the IRS revenue officers refiled the IRS tax lien to collect your delinquent income tax debt, they clearly are serious about following up after the refiling. More often than not, they will employ whatever collection methods they can to cover a refiled IRS tax lien. If you have an IRS tax lien filed against you and you need help, please contact the Tax Resolution Institute for a free consultation.