Can IRS file a lien for penalties and interest?
Q.Hi all--Thanks for the help. I am trying to refinance my home. The IRS has filed a lien for back taxes in the amount of $7196. The title company says they can also file a lien for the penalties and interest, hence they must be paid off as well. I am trying to file an abatement for the penalties and interest, but the IRS says the back taxes must be paid first before they will negotiate. Help! Can the IRS really file a lien for penalties and interest?
A.The lien covers all tax, penalty and interest. The $7196 was the assessed amount due when the notice was filed, but even then $7196 probably wouldn't have secured a release because of accrued interest and penalty. That lien won't be released until the entire account, including penalty and interest, has been resolved. There's too much missing information here for any intelligent advice other than "hire a representative." I recommend an enrolled agent experienced with balance due situations. There's a directory available at www.naea.org. I had a friend whose tax were mess. back taxes for 7-8 years (Fed and State). He had to pay before refinancing. I think he and IRS agreed to pay lump sum first (since it was too much) and started installment payments.. Anyway it was mess. even his CPA didn't want to touch his mess. I don't see the difference. Apparently you still owe the original tax, and regardless, the amount of the lien will be for the full amount of what you owe. Either pay the debt, find a way to negotiate the penalties (interest isn't negotiable) or ask the IRS to allow the title company to refinance that you can take home equity and pay the debt. In the sense that "additions to the tax" are treated as tax for collection purposes, yes. However, if there's no tax remaining (i.e. already paid), I don't know about that case. When I worked for the IRS, I did not work in collection. The sections numbered in the 6320's in the IRC govern liens.
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