The Internal Revenue Service has many tools at its disposal to collect past due tax debts. The large arsenal of collection instruments available to the IRS includes the authority to create a public record of the tax debt through the use of a tax lien. Tax liens are different from a levy -- the process of seizing real or personal property. A tax lien provides public notice that the taxpayer not only owes the debt, but that the IRS has priority over other debts owed by the individual or business.
The Tax Code requires the IRS to notify a taxpayer of the lien and rights to appeal the IRS lien in a timely manner. In addition, if the individual or business has a tax representative, the IRS must also notify that professional. Receiving notice of a tax lien can be unnerving. But, what happens when the IRS fails to properly notify a taxpayer under the procedures set forth in the Tax Code?
The Treasury Inspector General for Tax Administration recently issued a report detailing its findings on IRS due process compliance related to providing proper notice of tax liens. The agency is required to send the notice to the taxpayer's last known address. The compliance review included two separate processes for fiscal year 2016 -- a purely statistical review that involved 133 cases and a compliance test that focused on 162 undelivered notices.
Inspector General Finds IRS Due Process Errors
The Inspector General found that notice was properly provided in a majority of the cases, according to Accounting Today. However, the IG found that the IRS failed to send notices to the proper address of several taxpayers. The IRS had each of the taxpayer's last known address in hand, but simply failed to send the paperwork to the proper address. A number of the cases involved IRS failure to notify spouses who were listed as secondary taxpayers.
Due process requires that a taxpayer is provided proper notice of a tax lien, as well as his or her rights to appeal. The IRS does make mistakes. However, when a taxpayer is left in the dark about a lien, the ability to take action, including appealing the IRS decision is thwarted. If you or your business is facing IRS collection efforts in any form, consulting with a tax lawyer can be invaluable in understanding your rights.