Internal Revenue “Service” Is A Misnomer

For our country to remain great it needs a great revenue-raising arm.  It does not currently have one.

Every day I spend considerable time on the telephone with the IRS.  Sadly, about a third of the IRS employees I deal with are incompetent and unable to help me.  Another third have a bad attitude—some are terribly rude.  When I draw an IRS employee who is willing and able to help, I feel fortunate indeed.

Recently, I called the IRS for a client who owes trust fund recovery penalties.  When a business fails to pay its payroll taxes, the portion of the taxes that was withheld from employees’ wages─withheld income tax, Social Security tax, and Medicare tax─is assessed as a “trust fund recovery penalty” against the business’ “responsible persons.”  Like other Federal tax obligations, trust fund recovery penalties remaining unpaid are lien by operation of law against the taxpayer’s property, now owned or after-acquired, during the 10 years succeeding assessment.  An IRS computer generates a Notice of Federal Tax Lien (“NFTL”) and records it in the local register of deeds’ office, to put the world on notice of Federal tax lien.  An NTFL recorded against the taxpayer prevents the taxpayer from selling or mortgaging interests in real property.  Trust fund recovery penalties are not dischargeable in bankruptcy. 

Payroll taxes are the first obligations a business should pay. If a business cannot pay its payroll taxes, it should cease operations rather than subject its principals to trust fund recovery penalty assessments. 

My client wants to take advantage of historically low interest rates to refinance his house.  To do that, he needs to full-pay his Federal tax obligations in return for release of Federal tax liens against him.  The IRS Collections representative I drew in my call said he was unable to help me, but the IRS Lien Desk could help me. He said he thought the Lien Desk had reopened from pandemic lockdown, and gave me the Lien Desk phone number.  I called the Lien Desk, and remained on hold for one hour before I had to hang up for an appointment, without anyone having picked up my call.   

Mind you, my client is trying to ascertain the amount of Federal tax, penalties, and interest he owes, and pay it, in return for release of Federal tax liens outstanding against him.  But he is unable to find anyone at the IRS able to help him do this.

What about a taxpayer who needs to sell a house for a job move?  An NFTL of record against the taxpayer would prevent the taxpayer from closing on sale of the house.

Such an IRS serves neither the interests of the United States nor those of taxpayers.

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Stephen J. Dunn

Tax and Estate Planning Attorney and Author

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