IRS Collections: Part I, Background

[debtprison]

You mentioned that tax liens are automatic when you have a tax due. How soon is "automatic?" I filed April 15th and just got my letter of my amount due. I am waiting for bonus and wanting to see if they take my 1200 rebate and apply it. I am paying about 30/month in penalty and interest and plan to pay off in full within 2 months. Will they file a lien for that?

Old post but I can add some info. According to the IRS collection manuals $5,000 is the cut off where they WILL eventually file a lien as the collection agent is instructed to. I believe anything over $2,500 or so is optional but I may be in error. It typically takes them at least a year before they file the lien.

[GoingDown]

First query, yes. If the govt. made a demand and you don't pay, the lien attaches automatically. However, for anything to come of the lien, the IRS must usually file a Notice of Federal Tax Lien.

Second query, tax liens survive BK just like any other lien. However, if you have taxes that were assessed that are older than 10 years, then the statute of limitations has expired for the collection of that tax debt and the tax lien is void.

What if, at the time the IRS files a Notice of Federal Tax Lien, the debtor had no assets for the lien to attach to (no real estate, no stocks, no bonds, etc., and then the debtor files chapter 7 bankruptcy (after the 3 year waiting period from when the tax was due) and includes the tax debt in this bk filing? Would the tax debt be discharged?
And if it is discharged, wouldn't the lien become worthless, much like a judgment lien after a bankruptcy discharge?

If the post-bankruptcy discharged debtor then came into assets such as inheritance or real estate at a later time, would the old tax lien still have any power to levy the assets?

[HHM]

What if, at the time the IRS files a Notice of Federal Tax Lien, the debtor had no assets for the lien to attach to (no real estate, no stocks, no bonds, etc., and then the debtor files chapter 7 bankruptcy (after the 3 year waiting period from when the tax was due) and includes the tax debt in this bk filing? Would the tax debt be discharged?
And if it is discharged, wouldn't the lien become worthless, much like a judgment lien after a bankruptcy discharge?

If the post-bankruptcy discharged debtor then came into assets such as inheritance or real estate at a later time, would the old tax lien still have any power to levy the assets?

It the tax is dischargeable at the time of FILING BK, the tax lien only attaches to property of the BK estate, NOTE that is ALL property; tax liens are not subject to any exemptions. The assets in possession of the debtor at the time the tax lien is filed is largely irrelevant. If, at the time of filing BK, the underlying taxes are non-dischargeable, the tax lien WILL attach to future assets and survives the BK.

[jetsfan2010]

I field a ch 13, and had a tax lien placed on me a little over a yr ago by the IRS. We of course added them as priority debt, and want to confirm that upon them being paid in full at the end of the case, that lien gets released and shows as paid right?

Also, the amt of the lien(20k) includes a lot of interest/penalties in which the claim amt is substantially lower(4k), does that change anything?

[GoingDown]

It the tax is dischargeable at the time of FILING BK, the tax lien only attaches to property of the BK estate, NOTE that is ALL property; tax liens are not subject to any exemptions. The assets in possession of the debtor at the time the tax lien is filed is largely irrelevant. If, at the time of filing BK, the underlying taxes are non-dischargeable, the tax lien WILL attach to future assets and survives the BK.

Thanks! That makes sense to me.

In my case, the only asset of any value I have before I file BK is an old beat up truck. If I lose it when I file BK, it won't be a big deal to me. I'll just go out and buy another one.

[GoingDown]

I field a ch 13, and had a tax lien placed on me a little over a yr ago by the IRS. We of course added them as priority debt, and want to confirm that upon them being paid in full at the end of the case, that lien gets released and shows as paid right?

Also, the amt of the lien(20k) includes a lot of interest/penalties in which the claim amt is substantially lower(4k), does that change anything?

Who made the claim of 4K? The I.R.S. ?

Do you have an attorney? This is definitely something you may want to talk to your attorney about, so that you can be sure you won't still owe money to the I.R.S. after you complete your 13.

[jetsfan2010]

Talked to attorney about it. The IRS filed the priority claim for 4k and the remainder fell under unsecured.

[jacko]

I'm confused. If I file a BK7 using the federal exemptions and the only asset I had was my vehicle. If my vehicle is exempt by the auto and wildcard exemption, the IRS could still seize it even if you discharged the back taxes? Would that also apply if I were to exempt up to $10,000 in cash using the unused homestead exemption?

It the tax is dischargeable at the time of FILING BK, the tax lien only attaches to property of the BK estate, NOTE that is ALL property; tax liens are not subject to any exemptions. The assets in possession of the debtor at the time the tax lien is filed is largely irrelevant. If, at the time of filing BK, the underlying taxes are non-dischargeable, the tax lien WILL attach to future assets and survives the BK.

[HHM]

I'm confused. If I file a BK7 using the federal exemptions and the only asset I had was my vehicle. If my vehicle is exempt by the auto and wildcard exemption, the IRS could still seize it even if you discharged the back taxes? Would that also apply if I were to exempt up to $10,000 in cash using the unused homestead exemption?

YES, if there is a tax lien. Once the BK is discharged, your assets at the time of filing BK are fair game for the IRS.

[jacko]

If you owed, but there was no IRS tax lien yet, than the IRS gets nothing?

YES, if there is a tax lien. Once the BK is discharged, your assets at the time of filing BK are fair game for the IRS.

[iamprose]

I'm confused. If I file a BK7 using the federal exemptions and the only asset I had was my vehicle. If my vehicle is exempt by the auto and wildcard exemption, the IRS could still seize it even if you discharged the back taxes? Would that also apply if I were to exempt up to $10,000 in cash using the unused homestead exemption?

This is a great discussion. I would like to confirm that Iam interpreting this post correctly, along with #18 and #24. As I understand you, in a chapter 7, if there are liens for federal/state tax debts, then no chapter 7 federal exemptions are allowed(or that they are allowed, but after the chapter 7 is discharged, they can still seize those exempted assets? What would be the difference in either case?) I jus want to be crystal clear on this because after recently consulting four different attorneys, all of them said I could discharge the tax debts, and still keep the chapter 7 federal exempted assets(the unanimous dis-information would not surprise me, but I would be disappointed that the one attorney who only did BK, seemed like he could be somewhat trustworthy and we could work together). Thanx for the timely assistance.