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How do I get a Certificate of f Release of Federal Tax Lien?

Troy, MI |

I had a 2003 federal income tax bill of 35K. I'm not sure how I owed so much when my home based business has never been able to pay me a salary. At any rate, after a personal chapter 7 bankruptcy was discharged in 2011, I received an abatement for some of the taxes. I now owe 20K. I am operating the same business, but the business only earns approximately 30K a year. I have to live off of that as well cover business expenses. I'm afraid to file taxes because the business is earning something. I think they will take the little I have before the business has legs. I don't know how I would ever pay the 20K if fear keeps me from earning revenue. Also, I am denied resources that would help me grow the business because the lien on my credit is scaring off bankers. I feel stuck and unprotected.

The IRS has temporarily granted me "non collectible status" to give me an opportunity to amend my return. I have reason to believe there were errors with the preparation. They also told me about the OIC program. I just have reason to believe that the entire thing should have been abated in the bankruptcy. The IRS does not agree. By the way, I want to file and will be doing so immediately. I just want direction so that I don't make an incorrect situation worse.

Attorney Answers 5


  1. Best answer

    There are several ways to deal with your tax lien, but they all involve first filing your returns. If your business is making that little money, you can protect it from being taken by the IRS. no matter how much you owe in back taxes, the IRS will always let you keep enough money to pay your necessary living expenses, as long as you deal with them proactively and not try to avoid the problem. Sounds like you can probably get off real cheap with an offer in compromise, and may be able to get the lien released in the meantime

    you would like some free personal advice on how to deal with your situation, feel free to give me a call at 248 262-3400. I am a local tax attorney in Southfield, and deal with situations like this ask the time. Resolving tax problems is all we do at my firm, so give me a call tomorrow if you want to talk about it some more

    As with all advice posted on a public forum, my advice is not to be relied upon. Given the limited set of facts provided in the question, and the limited amount of research conducted in my answer, my advice is not intended to constitute "legal advice," and you should consult with another tax attorney or CPA to get a dependable answer to your question


  2. Not filing your tax returns will only make your situation worse because the penalties and interest will add to the underlying tax debt. Moreover, your reasoning as set forth in your fact pattern may give a taxing authority a basis for assessing criminal tax penalties, so take care in what you post online.

    Your bankruptcy should have wiped out any taxes and penalties assessed more than 3 years before your bankruptcy filing. Your business may be generating large tax bills because you are not submitting estimated tax payments to the US Treasury during the year -- a problem many small businesses fall into because no one is withholding payroll or income taxes on self-employment income. Then again, your tax preparer may not be representing you adequately. In any event, consider engaging a tax attorney to help you get into compliance and negotiate a payment arrangement with the IRS. I would normally recommend that you hire a CPA, but your fact pattern raises a number of legal issues that would best be communicated to an attorney. Feel free to contact me if I can assist you with this matter.

    Any comments posted on this site are for your general information and are not a substitute for professional legal representation. Please consult an attorney to adequately address your legal issue(s).

    Oscar Javier Ornelas
    915-600-7286
    oscar@ojotax.com

    Anything contained in this response is for informational purposes only and neither the author nor The Ornelas Firm PLLC ("Firm") makes any representations as to the accuracy or completeness of anything contained in this response. Nothing herein shall be interpreted as legal advice from the author or the Firm, or as creating an attorney-client relationship between the solicitor and the author or the Firm. Neither the author nor the Firm will be liable for any losses, injuries, or damages from the display or use of this information. You should consult an attorney whenever confronted with a serious legal issue. The Ornelas Firm PLLC (www.ojotax.com) may be contacted at 888-764-5822 or oscar@ojotax.com.


  3. As Oscar Ornelas has aptly stated, not filing your tax returns is only going to make your situation worse. From the facts that you have described, it appears that your business is not all that profitable. It could be that after payment of expenses, your business has only a minimal profit. If so, then you may qualify for the Earned Income Credit, which may more than offset any self-employment taxes that would be payable on your business profits. I suggest that you retain a skilled CPA or tax accountant and have him/her prepare your past due tax returns ASAP.

    As for obtaining Release of the Federal Tax Lien, you are entitled to obtain a lien release only if the liabilities in question have been "satisfied" (i.e., paid in full) or are "not legally enforceable. " The latter condition would apply if your tax liabilities were discharged in your bankruptcy and you owned insufficient assets on the bankruptcy petition date to fully secure the filed tax lien(s). If the value of your pre-petition assets was less than the amount of the filed tax liens, then the IRS should abate your tax liabilities down to the value of such assets and it may partially release the Notice of Federal Tax Lien ("NFTL").

    Finally, if you still do owe the IRS $20K of nondischarged tax liabilities (or have filed liens in that amount which attach to your pre-petition assets), then I suggest that hire a good CPA or tax controversy attorney and have them submit either an installment payment plan or an offer in compromise to the IRS to resolve your past due tax liabilities. Ignoring your tax problem will do you no good and will continue to stifle your entrepreneurial spirit and prevent your business from reaching its full potential. Resolving your tax problem will be a huge relief and free yourself to aim higher in your business. Good luck in resolving your tax issues!

    The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is licensed to practiced law ONLY in the State of California. Answers to questions from users in other jurisdictions or states are meant to provide only general information. Users should contact a local attorney in their jurisdiction or state to address their specific tax issue.


  4. I agree with my colleagues here - your business structure may continue to provide some tax benefits but you've got to get the taxes filed to get the IRS to work with you on the issues. You may want to give some serious consideration to getting professional tax help to get through this.

    Good luck.

    Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.


  5. The IRS will not consider an installment agreement or offer in compromise until all your returns are filed. Your first step should be to file all the necessary returns. Waiting to file will make your situation worse. You should contact a good CPA or tax controversy attorney to review your financial situation, and let you know what options you have. If you qualify for an offer in compromise and the IRS accepts your offer, then the federal tax lien will be released once the offer amount is full paid.

    Anna Barsegyan (818) 396-8272. The statement above is general in nature and does not constitute legal advice since not all the facts are known. You should retain an attorney to review all the facts specific to your case in order to receive advise specific to your case. The statement above does not create an attorney/client relationship. Answers on Avvo can only be general ones, as specific answers would require knowledge of all the facts. As such, they may or may not apply to the question.

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