Wednesday, July 9, 2014

Lien Filing Threshold Raised

Originally published on Passive Activities and Other Oxymorons on June 6th, 2011.
IRSIG SBSE-05-0311-039

So here is just a little bit of good news that I am putting up as Mondays bonus post.

I have often commented that there are two distinct area of tax practice.  (There are actually three but the third which Jack Townsend ably addresses in his aptly named blog, Federal Tax Crimes, is one in which mere accountants should not meddle except when hired and supervised by attorneys.  In the other two the point at which attorneys get involved is a matter of judgement.)  The first area, with which most adults have some familiarity, is tax determination, which includes return preparation and associated planning to minimize the ultimately determined tax.  Some practitioners might argue that the planning and compliance are distinct areas but I believe they need to be very closely integrated.  When the preparer doesn't understand the plan, the results are not good.  The other area is collections.  The IRS recognizes that they can't get blood from a stone.  So how much of a properly determined tax will ultimately be collected is less straightforward then people who have spent their lives cutting checks for the balance due realize.

Thankfully, I don't have a lot of experience in the collection area.  I do follow developments in it rather closely and this one may be of some significance.  One of the tools that collections has is filing a lien.  This is something that can make your life pretty miserable as this website explains:

A tax lien makes it very difficult to get any credit to make additional large purchases, such as a boat, car, or house. Having a lien placed on you by the IRS can be financially crippling for the time it is in place, it pretty much means you can't hold any assets in your name and you have to rely on other people for financing (as lien is on your credit too). All creditors would be notified including your mortgage company. A tax lien will stay in place as long as the IRS can legally enforce action against you (typically 10 years statute of limitations), or until your tax liabilities have been paid or settled with the IRS. The IRS becomes the highest of priority of creditors, so if you sold your house, car, or whatever property the lien was one and you had other liens on that property, the IRS would be the first to be paid.

So here is a little good news.  The IRS has lifted the threshold for lien filing raising it from $5,000 to $10,000.  Note that for an entity that is out of compliance in other areas, there is no threshold.

Interim Guidance for Increase in Lien Filing Threshold


March 28, 2011
Control Number: SBSE-05-0311-039
Expires: March 28, 2012
Impacted: IRM
IRM 5.8.4
Scott D. Reisher /s/ Scott D. Reisher
Acting Director, Collection Policy
Interim Guidance for Increase in Lien Filing Threshold

The purpose of this memorandum is to issue interim guidance regarding an increase to the threshold for filing Notices of Federal Tax Lien (NFTL) on field collection cases.
IRM provides guidance on filing and withholding the NFTL under various circumstances. The following text will be removed from the current “If and Then” chart:
there is an Unpaid Balance of Assessment (UBA) below $5,000 and filing the lien will promote payment compliance.
you may file a NFTL.

Note: This will also apply to additional assessments on currently open cases and those being reported as currently not collectable. You should take into account if assets are owned or the possibility of future assets being acquired during the collection statute period. In the case of accrual only liens, consider the amount of the accruals. (Accrual liens are discussed further in IRM .

If there is a UBA of any amount for an entity and the entity is not adhering to compliance requirements such as federal tax deposits, return filings, etc. (i.e. including but not limited to subsequent assessment).
file a NFTL
Other references to $5,000 in the IRM will be changed to $10,000.

In addition, the following sentence will be added to the end of IRM :

Generally NFTLs will not be filed when the UBA is less than $10,000, but they may be filed if they will protect the government's interest, such as pending bankruptcy or other exigent circumstances.

IRM reflects $5,000 in UBA as the dollar threshold for managerial approval of lien deferral and non-filing. This amount is likewise raised to $10,000.

If you have any questions, please contact me, or a member of your staff may contact Matthew Roberts, Senior Program Analyst.

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