Mishandled tax lien notices may affect thousands of taxpayers

More than 24,000 taxpayers may have been negatively affected recently when the IRS mishandled their tax lien notices. The errors could mean that some taxpayers were subject to IRS tax liens without their knowledge, potentially making their tax debt problems even worse. In some cases, a lack of proper notice may provide a defense for taxpayers who have been negatively affected by tax liens without their knowledge.

Tax lien basics

A tax lien is a claim that the government can make on your property if you do not pay your taxes. Tax liens can be issued by the federal government for tax debts owed to the IRS, or by the state of Connecticut for unpaid state tax debts. A tax lien can attach to your home, car or other assets to indicate that the government has a claim against that property. If the debt remains unpaid, the government may then issue a levy against the property, which can result in it being seized to pay your tax debts.

The federal government usually issues tax liens only for larger tax debts of $10,000 or more. The IRS can issue a Notice of Federal Tax Lien (NTFL) only if all of the following three conditions are met:

  • The IRS has assessed your tax liability.
  • The IRS has sent you a notice and demand for payment.
  • You have not paid the debt within 10 days after receiving notice.

In addition to interfering with your ability to sell your property, having an IRS tax lien against your property can be very damaging to your credit rating. Typically, a tax lien will stay on your credit report as long as you owe the debt, and for up to seven additional years after it is paid. Having a tax lien on your credit report means it may be difficult to secure a car loan, mortgage or other line of credit. Even if you are able to obtain a loan, a tax lien may limit your borrowing options to those with unfavorable terms such as high interest rates and harsh penalties.

Why notice matters

According to a report from the Treasury Inspector General for Tax Administration, the IRS mishandled the tax lien notice requirements for an estimated 24,237 taxpayers, for instance by failing to notify them of the existence of a lien or failing to advise them of their right to appeal the lien.

Although the report also indicates that the IRS usually followed proper procedures in its attempts to provide proper notice, in some cases the taxpayers may not have been correctly notified. Although rare, a lack of notice may provide a defense against a tax lien in certain cases. Ignoring or failing to take notice of a tax lien can also result in the government taking further action and seizing your property in payment of the tax debt before you have a chance to take steps to address the situation.

Do not delay in seeking help

If you have concerns about your liability for unpaid tax debts, any delay in resolving the issue is likely to make the problem worse. Not only will the debt continue to pile up, but you may sacrifice certain important procedural rights - such as the right to appeal - if you do not respond within the time limits set by the government. Contact the Baker Law Firm to discuss your situation and receive customized legal advice based on the individual circumstances involved.