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Ensuring release of tax lien after, before payment

Last time, we mentioned that Floyd Mayweather Jr. has filed an appeal with the IRS seeking temporary relief from payment of back taxes and a reduction in penalties. That appeal was filed in response to a tax lien the agency filed in April. It remains to be seen what will become of Mayweather’s petition, of course, but he is at least attempting to engage the IRS appeals process to protect his interests.

Tax liens are the IRS’ way of making sure they get paid, but a lien cannot be filed until certain conditions are fulfilled. In addition, once a lien is filed, it isn’t necessarily the final word on a taxpayer’s obligations to the IRS. 

The IRS is only able to file a tax lien after assessing the taxpayer’s liability, providing notice to the taxpayer and demanding payment, and not receiving full payment within 10 days. When a lien is filed, all of a taxpayer’s creditors know, and this can negatively impact the taxpayer’s credit. Tax liens attach to all property and property rights and allow the IRS to seize all of a taxpayer’s property in payment of the lien, so their effect is far-reaching.

Usually, the only way to have a lien released is to pay the IRS. It is sometimes also possible, though, to post a bond guaranteeing payment at a later date. Once payment is made, release doesn’t necessarily happen right away, and it may be beneficial for a taxpayer to request release of a tax lien. Doing so may help ensure the lien is removed more quickly.

In some cases, taxpayers who have not paid the amount requested in the tax lien may have other reasons to request a release of the lien. To do so, they must file a written application with the IRS explaining why the lien should be released. This appears to be what has happened in Mayweather’s case—although the IRS released his tax lien, it seems that he still owes a significant amount to the tax authority. He is, of course, also appealing his tax bill.

In our next post, we’ll say more about the IRS appeals process and the importance of working with an experienced attorney to protect one’s rights and interests.  

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