My attorney has a tax lien by the IRS against him and it is preventing me from being paid my settlement.

Asked over 2 years ago - Pasadena, CA

I was at a signal stopped. Two vehicles got into an accident one hit me. I paid my medical expenses as they happend. I hired an attorney and settled. I signed settlement papers on December 30, 2011. I reached out to my attorney to see when I could expect payment and he sent me an e-mail that he just found out he has a tax lien against him and the insurance company will not release the check without the IRS named on the check. As I have no tax issues or liens against me can the insurance company release my portion of the settlement? and keep his 33% is this even legal? why am I being penalzied? Please avise any recourse I have or options. I appreciate your help and insight.

Attorney answers (4)

  1. Henry Daniel Lively

    Contributor Level 20

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    Best Answer
    chosen by asker

    Answered . Part of these funds are obviously trust fund money that does not belong to your attorney and cannot be used to pay his debt with the IRS. Your attorney, or you may need to hire a tax attorney for this matter (at your attorneys expense), should call the IRS and explain the situation and ask for the portion of the funds that belong to the client (you) to be released from the lien. The IRS goes overboard to protect their position and has sent out a levy notice to the insurance company in case they every had funds due to the attorney, The insurance company is protecting their interests by following the order. Unfortunately, this leaves you holding the bag. At least for the time being. Communication with your attorney to get this matter resolved is key right now. You may also need to hire your own attorney if this does not get resolved quickly.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response... more
  2. Christopher Michael Larson

    Contributor Level 19

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    Answered . The lien should not apply to the trust fund. What your attorney needs is a Tax Attorney. Like yesterday.

    Christopher Larson
    Insight Law
    www.insightlawfirm.com

  3. Steven Anderson Leahy

    Pro

    Contributor Level 17

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    Answered . Insurance companies often seek any reason to delay payout. If this matter is because of a tax lien rather than a levy -the insurance company is just being difficult. Actually, the insurance company is not holding ANY of the attorney's money. That money belongs to the client (you). The client may owe the attorney a portion of that money - but that is between the attorney and client, not between the insurance company and the attorney.

    I would take the position that the insurance company does not have the right to hold that money (absent a levy by the IRS).

    I do agree with Attorney Lively. Your attorney absolutely needs an experienced tax professional to help resolve this matter.

    I hope this helps.
    Respectfully,
    Steven A. Leahy
    www.chicagotaxteam.com

    Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-... more
  4. Paul Arnold Nidich

    Contributor Level 12

    7

    Lawyers agree

    Answered . One question I have is who told you your attorney cannot pay you your money? If it is the attorney, that probably means that the insurance company sent him a check, but he did not deposit it into his Trust Account. Attorneys are generally required, at least in Ohio, to deposit any check received into his/her Trust Account that includes money, such as a client's, that does not belong to the attorney. That account should not have the Attorney's tax ID number. Therefore, your money can be paid to you out of that account without the lien or levy affecting it. If the attorney improperly deposited the money into his/her personal account, the proper step to take should be to contact your local or state bar association to file a complaint. I the attorney has never had a trust account but is required to have one, the Bar Association needs to know this. If the attorney just started bypassing his/her trust account, there may be more involved than just a professional complaint. Good luck.

    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each... more

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