Is There a Statute of Limitations for Federal Tax Liens?

EPGD Law Federal Tax Lien

What is a Federal Tax Lien?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. When the Internal Revenue Service (“IRS”) puts your unpaid balance due on their books, your liability to pay that balance is then assessed. Neglect or failure to fully pay the debt in time results in the IRS filing a Notice of Federal Tax Lien to alert all of your creditors that they now have legal rights to your property. The government can place a federal tax lien on essentially all of your property, including real estate, personal property and other financial assets. As of recently, the IRS is now legally obligated to put the Department of State on notice of your federal tax lien, which gives the Department of State authority to revoke or deny your passport.

Do Federal Tax Liens Show up on Your Credit Report?

Prior to 2018, federal tax debt appeared on an individual’s credit report. However, credit bureaus have since changed their policies. Today, the three major credit bureaus no longer show federal tax liens on their consumer credit reports. Although removed from credit reports, Notice of Federal Tax Liens are still public record and are discoverable by lenders and credit card companies.

Relief Programs for Unpaid Taxes

Taxpayers who have unpaid debts may be qualified for select relief programs offered by the government. The first option is an installment/payment plan, a taxpayer may ask for an installment plan with the IRS by filing a tax form 9465. Secondly, some taxpayers may qualify for an Offer in Compromise, which is an agreement between a taxpayer and the IRS that settles the tax liability for less than the full amount owed. Eligibility is usually measured by taking into account the taxpayer’s income and assets and deciding the appropriate amount he or she is able to pay.

The IRS has a few exceptions when it comes to certifying a taxpayer as a seriously delinquent tax debtor. Those who have, for example, filed for bankruptcy, were victims of tax-related identity theft or those who have been accounted by the IRS as having an uncollectable debt due to financial hardship, all qualify as exceptions to the seriously delinquent debt certification by the IRS. A taxpayer does not qualify for the Offer in Compromise if he or she is not up to date and fully compliant on their IRS filings.

How Long do Federal Tax Liens Last?

The IRS has a collection process lifetime of ten years. The collection clock begins from the date the IRS writes the unpaid balance in their book. From then, the term remains running and the IRS can legally take interest in your property and certify a Notice of Federal Tax Lien against you. Upon the ten-year mark, the IRS will no longer be able to pursue your unpaid tax debt, pursuant to the Collection Statute Expiration Date “CSED”.

A few exceptions apply to the CSED clock, however. When a taxpayer qualifies for an Offer in Compromise with the IRS, their CSED clock essentially stops until 30 days after the offer in compromise period ends. For example, a taxpayer is approved to pay off only $30,000 of his $90,000 unpaid tax debt. From then, the IRS will offer a period of time to pay back the full $30,000 and relinquish his seriously delinquent status. This period may be for eight months, and with that being said, the CSED clock will freeze for eight months while the offer in compromise clock runs, and thirty additional days after the eight-month time frame, the CSED clock will then pick up and begin tolling until its expiration date.

If you have unpaid federal taxes and would like to learn more information on how to avoid a federal tax lien, do not hesitate to contact one of our experienced attorneys at EPGD Business Law, with offices in Miami, FL, Washington, D.C., and West Palm Beach, FL. Call us at (786) 837-6787 or email us to schedule a consultation.

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*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

Categories: Tax Law

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