The tax attorneys at Nardone Law Group in Columbus, Ohio, frequently assist individuals and businesses that have been contacted by a revenue officer with the Internal Revenue Service, regarding federal tax liabilities. The IRS has substantial power to collect delinquent tax debts from taxpayers. If a taxpayer neglects to make payment of a federal tax liability, the IRS has broad authority and tools available to collect delinquent taxes, which includes the filing of a Notice of Federal Tax Lien. A Notice of Federal Tax Lien can cause a taxpayer significant financial harm, such as affecting one’s credit score or the potential of termination from employment. Therefore, it is crucial that taxpayers are aware of the various ways to obtain relief when issued a Notice of Federal Tax Lien.
In our prior article, Notice of Federal Tax Lien: Taxpayer Options and Alternatives, Nardone Law Group discussed several options that are generally available to assist taxpayers in minimizing the impact of a Notice of Federal Tax Lien. This article briefly highlights those options with a specific focus on the discharge of Notice of Federal Tax Lien process.
How to Obtain Relief from a Federal Tax Lien
The law generally defines a lien as a charge or encumbrance that one person has on the property of another as a security for a debt or obligation. A Notice of Federal Tax Lien arises when a person (individuals, trusts, estates, partnerships, companies, etc.) fails to pay any federal tax after a demand by the government for payment. When taxpayers are contacted by an IRS revenue officer with a Notice of Federal Tax Lien, it is important to know what options are available for relief.
There are four options that are generally available to a taxpayer to fully or partially resolve a Notice of Federal Tax Lien. They are: (i) Withdrawal, (ii) Release, (iii) Subordination, and (iv) Discharge, of a Notice of Federal Tax Lien. Each option has its own benefits and requirements that taxpayers must satisfy to obtain partial or full relief. Here, we will take a closer look at how taxpayers can discharge a Notice of Federal Tax Lien.
Discharging a Federal Tax Lien
When a taxpayer receives a Notice of Federal Tax Lien from an IRS revenue officer, the lien attaches to all of the taxpayer’s assets. The taxpayer can file an application, requesting that the IRS discharge certain property from the Notice of Federal Tax Lien. If the IRS approves the discharge, this option effectively allows the taxpayer to sell the discharged property free of any liens and encumbrances. Generally, the IRS will require the taxpayer to transfer the amount of sale proceeds that the IRS deems to be its monetary interest in the property to the IRS, as a payment towards the taxpayer’s tax debt.
NLG Comment: It is important to note that the Notice of Federal Tax Lien remains in effect and attached to all of the taxpayer’s other, undischarged assets until the taxpayer pays their tax liabilities in full. Only the specific property that was discharged is rendered free from the Notice of Federal Tax Lien.
The discharge of Notice of Federal Tax Lien process is a powerful tool for taxpayers. It allows taxpayers to utilize assets for various transactions, or to transfer those assets free and clear of any liens or encumbrances. The most common transactions that involve a discharge include:
- A sale of a personal residence.
- A sale of commercial real estate.
- The sale or purchase of a business, including the assets of that business.
Taxpayers who are subject to Notice of Federal Tax Lien restrictions, and need to initiate any of the above transactions, should ensure they seek out a well-qualified tax attorney, specializing in tax controversy matters, such as federal tax liabilities and disputes with the Internal Revenue Service.
Contact Nardone Law Group
Nardone Law Group routinely represents individuals and businesses in federal tax matters, including the discharge of Federal Tax Liens. If you have been contacted by an IRS revenue officer and are subject to a Notice of Federal Tax Lien, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing clients before the IRS. If you are subject to a Notice of Federal Tax Lien, we will thoroughly review your case to determine what options and alternatives are available.