Unpaid Federal Taxes, Lead to Federal Tax Liens

February 14, 2012
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Proving that celebrities are not above the law, the IRS recently served rapper Lil’ Kim with a tax lien for allegedly dodging more than $1 million in taxes. While it is celebrity tax stories that most often make the headlines, businesses and individuals frequently face the serious consequences of having a tax lien filed against them when the IRS determines that federal taxes have gone unpaid. A lien gives the IRS a legal claim to all of a taxpayer’s property as security for tax debt. The IRS will send a Notice of Federal Tax Lien only after:
  • It assesses a tax liability;
  • It sends the taxpayer a Notice and Demand for Payment, which details the amount of taxes owed; and
  • The taxpayer neglects or refuses to fully pay the debt within 10 days after the Notice and Demand for Payment is sent.
The filing of a Notice of Federal Tax Lien is detrimental to a business or individual’s credit rating and can restrict one’s ability to obtain financing or to secure a commercial lease. Moreover, because an IRS tax lien is a public record and thus accessible by tabloids and news media, the filing of a tax lien can be quite embarrassing and harmful to the reputation of celebrities, politicians, high-profile citizens, and well-known corporations.   Therefore, taxpayers who receive any correspondence or notices from the IRS alleging unpaid taxes should immediately consult with counsel and seek to resolve the issue before a Notice of Federal Tax Lien is filed.