Ignoring unpaid taxes is a risky solution.  Neither the Internal Revenue Service nor the Comptroller of Maryland has a short memory when it comes to unpaid taxes, and these debts often do not disappear unless concrete steps are taken to reach a resolution with them.  The Service and Comptroller often use tax liens to collect what is due to them, so it is important to understand how tax liens works, how its imposition can be avoided and how best to achieve a resolution when it arises.

What is a tax lien?

A tax lien is a government’s legal claim against a taxpayer’s property when the taxpayer fails to pay their taxes in full. A federal tax lien arises after the Service assesses a tax, issues a Notice and Demand for payment of the tax, and the taxpayer fails to pay it.  A Maryland tax lien arises in general whenever there is any unpaid Maryland tax, interest or penalty.  A tax lien attaches to all of a taxpayer’s assets, such as property, securities and vehicles, and also attaches to a taxpayer’s after-acquired property while the lien is in effect.

When federal taxes remains unpaid, the Service will file a Notice of Federal Tax Lien to perfect their lien and alert other creditors that the government has a legal right to the taxpayer’s property.  For unpaid Maryland taxes, the Comptroller will do the same by filing a notice of tax lien with the clerk of the circuit court where the taxpayer’s business or residence is located that gives the Comptroller’s lien the full force and effect of a judgment lien.

In addition to attaching to a taxpayer’s property, tax liens may limit a taxpayer’s ability to maintain or obtain credit.  Tax liens can also affect a taxpayer’s ability to obtain a security clearance as well as secure or retain employment.  As a result, tax liens should be taken seriously.  The Maryland tax attorneys at Rosenberg Martin Greenberg bring vast experience to bear to help clients resolve their tax debts and disputes.  We are adept in assisting taxpayers in reaching full compliance, mitigating penalties, putting a stop to wage garnishments and clearing liens.

How tax liens can impact taxpayers

In general, when a tax lien arises, its origination date relates back to the date of assessment, and it attaches to the taxpayer’s property as of that date as well as to the taxpayer’s future property until the tax liability is satisfied or becomes unenforceable by lapse of time.  In certain circumstances, a taxpayer’s property can be discharged from a tax lien.  Transfers of affected property do not extinguish a tax lien.  If an asset is sold by a delinquent taxpayer, the tax lien will attach to the profits of that sale.  To transfer or sell property subject to a tax lien, the taxpayer either needs to pay the tax liability in full or request a discharge of the property at issue from the existing lien.

The government can file a tax lien despite whether the taxpayer is negotiating in good faith to pay the tax due, has entered into an installment agreement, or has had their accounts placed into “Currently Not Collectible” status.  A taxpayer can appeal a Notice of Federal Tax Lien within 30 days of a lien notice.  If a taxpayer disagrees with Appeals’ determination, they can request judicial review by petitioning the United States Tax Court within 30 days of the date on the Notice of Determination letter. It is possible to have liens withdrawn or released under certain circumstances.  A seasoned tax professional can make a difference navigating the complex laws and regulations concerning liens.

Insights and Guidance Maryland Taxpayers Can Trust

The Baltimore tax attorneys of Rosenberg Martin Greenberg routinely aid clients with federal or state tax issues.  We are skilled at obtaining lien discharges, subordinations, withdrawals and releases as well as negotiating with the Service and Comptroller.  If you need assistance in handling a tax lien or another enforcement action, contact Rosenberg Martin Greenberg’s Brian Crepeau at bcrepeau@rosenbergmartin.com.