The IRS Raises Lien Filing Threshold for Some Businesses Facing Past Due Tax Debts

Blog post by Robert B. Teuber

When a business owes a tax debt, it is commonplace for the IRS to file a tax lien to secure their interest in collecting the liability. In many ways the IRS views this as a reasonable (albeit unilateral) decision to grant itself a mortgage on all of the taxpayer’s assets owed before or after the lien filing. Taxpayers that have to deal with the crushing impact of these stigmatizing liens often ask whether liens can be avoided. In some cases, they can be.

In February 2011, the IRS announced what they called the “Fresh Start Program” which increased the dollar thresholds at which it would file a lien against taxpayers owing unpaid taxes. The move was welcomed by those with liabilities below the threshold which, at the time, was increased from $10,000 to $25,000. On January 20, 2012, the IRS again increased the lien filing threshold; this time up to $50,000.  It has also increased the time frame over which a debt can be paid from 60 months to 72 months. This means that IRS agents are now authorized to refrain from filing a tax lien against certain taxpayers with debts between $25,001 and $50,000 provided that the debt is paid off in 6 years. There are, however, limitations on who qualifies for the benefits of these latest changes.

The Memorandum announcing the changes includes the following limitations:

  • Qualifying taxpayers include only individuals or out of business sole proprietorships.
  • The taxpayer must enter into an installment payment plan under which the monthly payments are made by direct debit from a bank account.
  • The IRS must verify that the payment plan is supported by the taxpayer’s financial condition. This means that the new 72 month payment plan operates as a cap on the repayment terms and not as an automatic timeframe over which a taxpayer is allowed to pay the debt.

The impact of the change is that the IRS collection agents now have it within their authority not to file tax liens against qualifying taxpayers with debts up to $50,000. Whether they will refrain from filing a lien will still depend on the particular circumstances of each case and such arrangements come with certain strings attached. For those who do qualify, however, this is certainly a welcome move by the IRS.

In Estate Planning Your Most Valuable Asset Could Be: Organization!

Blog post by Sandy S. Swartzberg

Step One of Estate Planning

The first step of estate planning is in some ways the simplest and also the most important. Prepare a list of your assets and where the assets are located. Many people die and their heirs spend lots of money and time searching for the decedent’s assets. In some cases, all of the assets are never found. Eventually, most of those assets end up going to the government.

Or perhaps they may be found, but it takes so long that part of the asset is lost. Further, the asset may be titled in such a way that it costs the heirs a substantial amount of money to transfer the asset to the heirs. One example is the transfer of stock certificates. If people are holding the actual stock certificates, as opposed to being held by a custodian, the process of transferring those stock certificates is time consuming. I had a case about ten years ago where we found out that the decedent had an additional safety deposit box when we got the bill for the safety deposit box. Upon opening the safety deposit box, we found about $30,000 in cash plus another $60,000 in government bonds. Some of the government bonds had matured twenty years before.

In another instance, I helped my grandfather, Samuel Poses, with the probate of an estate of an elderly widow. Her son told us there was not much in the estate but it still had to be transferred. When going through the records, we noticed that she was receiving interest on some bank accounts. On further inquiry, her neighbor said that she had a habit of opening a bank account to get the free toaster, radio, etc. She had been a resident of New York City so we wrote to all of the banks within a twenty mile radius (radius of where? City or where she lived?) inquiring whether she had an account there. We received more than fifty replies indicating that she had an account at the bank. Many of these accounts went back twenty to thirty years. There was over $70,000 in those accounts. Lest you think this is not a lot of money, you could buy a brand new, fully equipped Cadillac at that time for about $9,000. So, she had over seven Cadillacs worth of assets that nobody was aware of.

When my grandfather explained to me what had been discovered, I asked whether the decedent had spent time in Florida over the winter. I asked this question because my grandparents had many friends who spent the winters in Florida. My grandfather said – “Oh my, she did spend about three months a year in Florida!” She wintered in Hollywood, Florida.  So out went the letter again. This time, we only got about three Cadillacs worth of bank accounts. My grandfather finished the probate and passed all of the assets to her son. (We found out later that while visiting her then-deceased sister in California, she had opened up another Cadillac worth of bank accounts.)

The lesson is – keep track of your assets, make a list and go over that list with your heirs. Then, after you have made the list, take it to your attorney to decide whether the assets are titled in the best way possible. Many assets can have what is called a pay-on-death beneficiary designation allowing the asset to pass without going through probate.

Even if you are not concerned about your heirs, you should make a list anyway, because when I have gone through the estate planning process with most people, they start thinking about it and inevitably a couple of forgotten assets come to mind such as an IRA, GI insurance, an old bank account they have been meaning to close, etc. Therefore, Step One: make that list of assets and make sure your heirs know where the list is.


The comments and opinions expressed in this blog are intended for informational purposes only and do not constitute legal advice. Reading or using the information in this blog does not create the existence of an attorney-client privilege. Due to the changing nature of the law, the blog posts may contain dated material. For an update on the current law and the application of the law to your particular facts and circumstances, consult a legal advisor. The information contained herein is not a substitute for obtaining legal advice from a qualified attorney licensed in your state.