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Paying tax liens


Margaret CPA in OH

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New client has several tax liens.  Sister has POA for brother (owner) with advanced dementia, needs funds to pay facility.  I submitted 2848 POA to Lien Processing Unit March 18, yesterday finally got a payoff amount due by May 22.  I don't see a way to pay electronically.  If by check, processing time will be a wild card but it seems must happen to get discharge.  Form 783 has area for agent to provide info about proceeds used to pay lien but, again, time delays.  Ideas?  I've never had a client with any liens so very new territory for me.

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Before paying, I would suggest trying to get some of the penalties waived.....first time abatement, medical reasonable cause....and to determine if the tax & penalties are correct.

In order to get penalties waived, prepare and file a Form 12153, Request for a Collection Due Process or Equivalent Hearing.   Then you can review the transcript for the penalties and your clients facts.  You can then present the facts to the IRS Appeals Officer with a reasonable cause request to abate the penalties.  This may also give you time to set up a payment/installment plan if your client needs to pay over a period of time.

https://www.irs.gov/appeals/collection-due-process-cdp-faqs

If the payments have to be made for some reason, you may be able to pay through IRS Direct Pay

https://www.irs.gov/payments/direct-pay

Here are the areas that they allow, which appears to include Notices of Tax due.

https://www.irs.gov/payments/available-payment-types-for-irs-direct-pay 

 

 

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Thanks so much for all this information, PatHack. I will definitely look into this as the client has had dementia for some time according to the sister.  I believe it was fairly recently that the liens were discovered when trying to sell the house.  The sister says they do have the money to pay the liens including penalty and interest and want to get the house sold as soon as possible.  With that in mind, my guess is that filing Form 12153 and follow up would take considerable time.  It took a month just to get the balances due and, of course, no one answers the phone these days.  I talked to the Lien Collections unit just a day or so before everything shut down.

I have looked at the electronic payment options before but nothing struck me as paying off tax liens.  The letter from collections did not include that option.  Also we don't have any of the original notices.  There is the option of sending a check overnight delivery so that could hasten matters.  I will present to the client's sister.  But then the process of getting the discharge of the lien seems impossible for quick turn around.  I am hoping the realtor handling the potential sale can manage although Form 783 has a place for realtor info re the sale and payment from proceeds. 

They spent a lot of time trying to figure things out themselves.  I just hope the potential buyers don't back out.

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Can the payment of the lien be handled through the attorney or mortgage company handling the closing?  In other words, show the lien on the settlement, give them the paperwork received from the IRS and the funds to cover the lien and have them pay the lien from their escrow account so that they know that it was done?  Will this satisfy them so the closing can proceed?

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Sorry, I don't know the answer whether the closing agent can pay the tax lien from the escrow.  Gut feeling, it's likely that they could do it. I assume it is a matter of real estate law that would determine what the closing agent can do.

Additional note, if the lien is paid, you may be able to go back to the IRS to contest the tax and penalties if the taxpayer wants to seek some abatement.

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Gail, I have advised the client(s) sister to next contact the realtor/agent as she was the first one to tell the sister that a payoff amount was needed.  None of them could figure out how to get that until the sister of a friend of the client's partner (got that?) suggested that I might be able to help.  So I finally got the payoff figure in a fax Wednesday and immediately forwarded to sister with suggested next step - realtor/agent/mortgage company.  The property itself has no mortgage, just the tax liens.  I am hoping the agent can manage from here.

PatHack, good Idea about seeking some abatement later.  I will also suggest that to sister.  I think there is time to deal with that later but the potential buyers wanted to close by March 31 and had postponed once already.  I don't know where that stands now, hoping to hear from sister soon.

Thanks so much for all suggestions.  After nearly 30 years, this is a first for me.  Really stretched me, just hope all works out for the client.

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According to the IRS video below that I launched from  this IRS page on discharge of tax liens, you need to file form 14135 and allow at least 45 days before closing. The video goes step by step and talks about the required attachments. I think your client may be waiting until IRS reopens before this can be taken care of properly. 

https://www.irsvideos.gov/Professional/IRSLiens/LienSeg1_3

 

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Thanks, Judy. I've already looked at that and forwarded to the sister, both the video and the form.  As there is a place for the agent to complete some data, I thought she should next check with the agent.  I did caution that there may be 'a delay' in processing.  I had read somewhere else though that some things can be managed more quickly in an urgent situation.  Of course that would likely need a human at IRS but this is semi-urgent as the funds are needed to support the client.

In any event, I'm not sure there is anything I can do at this point. Early on the sister told me they just needed the payoff amount so the agent could take care of it at the closing so I assumed there was some 'magic' that could take place in real estate closings.  Not in my skill set!

Thanks again.

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The goal here is to get the home sale closed ASAP, otherwise the buyers might walk. Finding buyers now is very difficult. In fact many buyers do walk when they find out tax liens are involved, or may want to reconsider their offer.  Although, there are a few good suggestions, they would all cause a delay even under normal circumstances.  

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