IRS Liabilities: IFA Webinar Roundup Published October 12, 2012
Last week, Tax Guard teamed up with the International Factoring Association to present an educational webinar on the important steps the IRS must take in order to enforce collections.
The attendees learned about everything from the non-payment of IRS taxes, tax levy specifics, forced seizure of lender’s collateral and the complicated process of IRS collections. We had a robust Q&A session at the end that we look forward to sharing with you in an upcoming blog post.
If you were unable to make it, we spent some time unraveling five big myths that lenders have regarding their clients and the IRS. Here they are:
1. My clients haven’t had any problems with the IRS
We’re happy to announce that we recently completed our 150,000th Tax Guard report. As you can imagine, we’ve obtained a great deal of insight into the tax risk that exists within lending portfolios. We’ve found that in a typical portfolio, 1/3 of clients monitored have IRS tax liabilities, 1/3 have missing IRS tax returns, and 1/3 have no IRS tax issues at all. Yes, your clients likely have had some problems with the IRS.
2. If my client doesn’t file a tax return, there is no risk to me, the lender
Any unfiled returns can result in a tax liability once they are filed. One way to know if your client is actually making federal tax deposits and filing returns is to contact the IRS directly. Just because your client provides you with a copy of a return, does not mean it was filed (or even paid). Keep in mind, many taxpayers don’t file returns because they don’t have the funds to pay the liability. Missing tax returns are a potential risk indicator.
3. If there is no Federal Tax Lien on public record, there is no risk to me, the lender
Here’s the truth–the real risk is created the moment the client fails to pay the tax which happens well before a tax lien is filed. It’s important to recognize that the filing of the tax lien is simply the IRS providing public notice of the tax liability and establishing priority. Just because a lien has not been filed, does not mean there is no liability or risk to you.
4. The tax lien filed by the IRS is the actual amount owing to the IRS
Tax lien amounts are a snapshot in time–just a tip of the iceberg. Tax liens are not updated as payments are made or as additional accruals are assessed. Frequently, liens do not include all the balances that are due.
5. If the IRS has not filed a tax lien, they cannot issue a tax levy
This one is one that we are constantly educating lenders about. The IRS can issue a levy even when no Notice of Federal Tax Lien has been issued. However, wrongful levies are a common occurrence. A wrongful levy happens not because the IRS cannot levy, but because the IRS does not have priority interest in the assets. It worth nothing that it can be very difficult to reverse a wrongful levy.
If you have any questions about these myths or IRS liens and levies, please contact us and we’ll be happy to share our insight with you. Or sign up for one of our upcoming webinars.