My parents have a federal lien dating back to 1993. They owned a small business and the IRS claimed they missed 1 quarters' worth of payroll taxes . Several years after the lien was filed, the IRS sent someone out to see them to negotiate a settlement. As bizarre as this sounds, the agent was soon thereafter arrested for embezzling funds from the IRS - turns out his name contained enough letters that he was able to convert checks written to "IRS" into his name. He never turned over any files when he was arrested, so the details of their settlement agreement were lost. Anyway, they recently decided to move to our state and buy a house after years of renting. Their credit scores are both in the high 700s, and they were initially approved. Then the judgement came back to bite, several banks declined them, so they hired a tax attorney to contact the IRS and investigate the status of their judgement. According to the attorney, the IRS has them listed as "non collectible" and "non-traceable" and told them that the lien was set to be discharged at the end of this year. From what he could determine, their case had fallen into a black hole after their agent was arrested. Is it possible that the IRS would ever let go of this? My understanding is that federal liens stay with you til you die and then some. They are optimistic that they will be able to buy a house in January, but I am afraid they'll be stuck with this thing forever. Any experience out there? Thanks! Poochie
That's just insane. I don't know how the IRS can function when they are as disorganized as they are. Do you have any experience with IRS liens? Are my folks just dreaming to think this will actually go away? Thanks for this and all your many other posts - Poochie
It is not surprising that their tax liability fell into a black hole after their payment. In fact, to cover up the theft, the IRS employee would have had to have done something to prevent the lack of a real settlement from surfacing. Marking the account "non-collectible" and "non-tracable" would appear to do that. It is an interesting issue, since the payment was made to IRS and presented to an IRS employee, whether the theft was from your parents, or from the IRS, although it may be too late to recover credit for the payment that was actually made. Was the person they paid an IRS employee? Did he represent that the IRS reached a settlement with them? Did they keep a copy of the settlement documentation? Did they give him a check made out to IRS, and was it for the whole settlement? Did it indicate what it was payment for? How did they find out they were scammed? Did they see the checks had been altered, and when? When did they find out he was or had been arrested? Was it recently, when the supposedly settled tax liability showed up as a lien? In other words, how can they show payments were made, apparently to the IRS, at a certain time, and in good faith, against their liability for taxes?
Re SOL on IRS, it is not as simple as "6 years". Regardless I would think in your case the 10 year is already passed and the IRS is outta luck anyway? They don't have a choice to let it go. They have to. quoting here... As a general rule, the IRS must assess tax, or file suit against the taxpayer to collect the tax, within three years after the return is filed [IRC Sec. 6501(a)]. An extended six-year statute of limitations on assessment applies to returns that omit a substantial amount of gross income [IRC Sec. 6501(e)]. 10/6 year collections For assessments of tax or levy made after November 5, 1990, the IRS cannot either collect or levy any tax 10 years after the date of assessment of tax or levy. See Section 6502(a)(1) of the Tax Code and section 301.6502-1 of the Tax Regulations. Court proceedings must also be started by the IRS within the 10 year statute of limitations. Section 301.6502-1(a)(1) of the Tax Regulations.
Just to clarify a few points - they did not actually write a check to the agent who was later arrested - he had their file and they had worked out an agreement, but no money was collected and the file disappeared with him. They currently have a judgement in the county in which they reside. Does that mean that the IRS has already taken court action? I thought that judgements were renewable in perpetuity, meaning that even if it didn't show on their credit any more, the IRS could still seize their assets (meaning they can never buy a house.) From what their tax attorney told them recently, the IRS was going to automatically vacate or discharge (can't remember the specific language) the judgement in December because some deadline will have passed. That doesn't make sense to me. Why would they vacate a judgement if there is the slightest chance they could get something, even if it is out of their estate many years from now? Thanks Poochie
Hmmm, now you are getting into areas that I am not sure of. In Texas they have 10 years since the judgment is actually "served" (something about where they start a collection effort), then they have 2 years after a 10 years has expired to get to do it again. It will vary from state to state. I was talking about the actual collection of the outstanding debt not the sol regarding a judgment. (quick sob story, my X missed a 100.00 payment to the IRS on a 30k bill so the IRS wised up and now I pay almost 1 grand a month). They are going to be sure I pay it off before the 10 year sol. Talk about 100.00 costing me about 40,000. Arggh
