As the public has become more aware that phone calls demanding payment of delinquent taxes are a fraudulent scheme, the scammers had to change their game plan. Although it has been used in the past, the IRS has found a resurgence in the scam involving IRS tax liens. In this scam the taxpayer will receive a letter in the mail. The letter will threaten the taxpayer with the filing of an IRS lien if the delinquent tax is not paid. Since the IRS does not call taxpayers demanding tax payment, a person receiving an actual letter demanding payment would believe that the request is legitimate and pay the scammer in order to prevent the filing of an IRS tax lien.

BUT WHAT IS A TAX LIEN?

The amount of tax, penalty and interest owed to the IRS becomes a lien in favor of the United States when the taxpayer fails to pay the amount due after demand for payment has been made. This lien arises on the date of assessment of the tax and attaches to all of the taxpayer’s real and personal property. The existence of this lien is not known to anybody other than the IRS and the taxpayer. The lien would not appear on the taxpayer’s credit report. The taxpayer could sell or borrow against his/her property without negative effect to the purchaser or lender.

In order to protect its claim to the taxpayer’s property, the IRS will file a federal tax lien in the public records of the county where the taxpayer’s property is located. In many instances, the IRS will file the lien even if the taxpayer enters into a payment arrangement with the IRS. This filing puts third parties on notice that the taxpayer owes taxes to the IRS and that the IRS has a lien against the taxpayer’s property. Once recorded the lien is reported on the taxpayer’s credit report. The existence of the lien makes it much more difficult for a taxpayer to sell or borrow against his/her property.

PROTECTING YOURSELF FROM THE SCAM

1. The letter or bill threatens an IRS lien or levy, but does not come from the IRS. The letter comes from an agency called the “Bureau of Tax Enforcement” or something similar to that. There is no such agency. Any letter or bill from the IRS specifically refers to the IRS and bears the IRS logo.

2. The letter or bill references the IRS. This is done to confuse taxpayers into thinking the letter is legitimate. The IRS does not have other agencies send letters or bills on their behalf. While the IRS does have four collection agencies collecting tax debt, the IRS will send the taxpayer a letter notifying him/her that the matter has been assigned to a collection agency and will disclose the name of the agency. These agencies do not file liens on behalf of the IRS. See https://magdaabdogomezlaw.com/irs-to-implement-new-program/ 

3. The letter demands the payment of overdue taxes or else the IRS will levy or file a tax lien. A taxpayer should know if he/she owes taxes to the IRS. Receiving a letter requesting payment for taxes of which the taxpayer is unaware should sound an alarm bell. The IRS sends numerous letters demanding payment. The first demand for payment will generally have an explanation of why the tax is due and will reference the year for which the tax is due. If you receive such a letter and are not sure whether you owe the IRS or not, call them at 1-800-829-1040.

4. When the IRS begins its collection process it will include in its mailing, publications regarding the IRS collection process and your rights as a taxpayer. If the demand for payment does not include these publications it may not be legitimate.

5. The law provides the taxpayer with appeal rights for levies and the filing of tax liens. These appeal rights are triggered at the time certain letters are sent to the taxpayer. When the IRS sends the letter which triggers these rights, the IRS will send publications explaining these appeal rights. Failure to include these publications may also be a red flag.

If you receive a letter demanding a payment of taxes when you know you do not owe any taxes you should:

• Contact the Treasury Inspector General for Tax Administration to report the letter using the words “IRS Lien” and going to https://www.treasury.gov/tigta/contact_report_scam.shtml
• Scan the letter/bill and send it to [email protected]
• Report the letter to the Federal Trade Commission at https://www.ftccomplaintassistant.gov/Information?OrgCode=IRS#crnt&panel1-1
• Report the letter to the FBI at https://www.ic3.gov/default.aspx

If you receive a letter and are unsure whether it is legitimate or not feel free to reach out to me for assistance.