IRS sending out tax refunds amidst careful handling of tax liens - The Complex Tax Law Firm, LLCKid Gloves: Handling Tax Liens With Care

When it comes to discussions about tax liens, especially with underwriters, brokers, and title agents, I’ve learned to tread lightly. This isn’t a reflection on my friends in the lending agencies but, the truth is, handling these conversations requires kid gloves, and an approach that is both patient and nuanced.

Often, when closing on a business or real estate loan, multiple parties at a title company and underwriting scrutinize the deal at the last minute. They might suddenly discover a tax lien and panic, wondering when it will be resolved. The irony is that I might have discussed the same matter with these very same parties five weeks prior, assuring them that it was resolved. Yet, I find myself re-explaining the logistics, drafting letters, and presenting IRS documentation to ease their concerns.

Fortunately, we’ve established what we call a “lien unit” within my firm for precisely this purpose. We’ve found it essential to provide this service to our clients as, in many cases, clients have already paid off the liens, but they still appear on old title reports. This discrepancy often leads to confusion and requires us to explain to title companies that the lien has indeed been cleared and paid, and it’s no longer recorded with the IRS. As such, we must provide IRS documentation and clarify how these liens apply. Of course, the numbers don’t always align, which adds to the complexity of the explanation, but the ultimate goal is to verify that the lien won’t hinder the loan issuance.

There are three possible outcomes: discharge, release, or subordination:

  • Discharge is the simplest, where the IRS will not encumber the asset used as collateral for the loan.
  • Release means the lien has been entirely removed.
  • Subordination is more intricate; it involves placing the lien in second position, ensuring the lender retains the primary claim over the assets being encumbered by the loan.

Naturally, these processes take time, and having an attorney experienced in this area, who understands the necessary documentation and timeframes, is invaluable. You have to keep in mind, these matters don’t require just one explanation; it’s an explanation for the broker, title, underwriting, underwriting’s legal team, and possibly multiple rounds to facilitate it.

Once completed, it’s crucial to verify that the funds go to the correct recipients for the liens to be genuinely released. This process is complex but serves all parties involved – ensuring correct procedures for the title are followed, protecting underwriters with legal documentation, and enabling clients and brokers alike to secure funding vital for their business operations or tax payments.

Additional Insights Before Moving Forward

One anecdotal point to note, especially regarding subordination, is that some lenders might seek to encumber your accounts receivable. (This frequently happens with factoring companies.) When this happens, subordination needs to be reestablished every 90 days. If a factoring company wants to secure a loan and requests a discharge of the lien on accounts receivable for a business that’s generating consistent income, they should be aware that subordination is a quarterly affair.

As long as this is understood, it can benefit both the client and the factoring company. However, there have been cases where this wasn’t communicated effectively, leading to IRS account receivable levies and repayment issues for the lending institution. It’s crucial for lenders to comprehend the nature of the loan and the scope of the discharge being secured. A tax attorney can play a pivotal role in ensuring a smooth process in such cases.

For more information on IRS Lien Discharge, Subordination, And Release, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (303) 720-6573 today.