The Smoking Gun recently reported that the IRS had filed a Notice of Federal Tax Lien against Robert De Niro for over $6.4 million in back taxes. You can view a copy of the lien on the Smoking Gun website.
Let’s not immediately judge Mr. De Niro as a bad taxpayer. His spokesperson said that the IRS notices for the balance due were sent to an old address and that he paid the balance in full immediately after learning of the lien.
The IRS doesn’t file liens just when it’s in the mood. There are a couple of things that first must happen:
- The taxpayer must owe money to the IRS. According to the lien filed, Mr. De Niro owed the IRS for his 2013 tax year. It’s possible his 2013 tax return was filed with a balance due, and it wasn’t paid upon filing.
- If tax owed isn’t paid after a formal request by the IRS, the Internal Revenue Code grants an automatic lien against all of a taxpayer’s property and rights to property. This is sometimes referred to as a “silent lien.”
The IRS then decides whether to file a Notice of Federal Tax Lien. Various factors are considered such as compliance history, protecting the government’s interest, and whether filing the lien will hamper collection.
By filing a Notice of Federal Tax Lien, like the one against Mr. De Niro, the IRS establishes collection priority against other creditors. A Notice of Federal Tax Lien puts the world on notice that the debt is owed to the IRS. A taxpayer has collection due process rights to protest the Notice of Federal Tax Lien, but the appeal rights arise after the lien notice is filed.
Federal tax liens show up on a taxpayer’s credit report. If a taxpayer pays in full the balance due subject to the lien, the lien is released. The record would reflect that the lien is no longer in effect, but the existence of the lien may remain on the taxpayer’s credit for several years.
Liens may also present obstacles when a taxpayer is seeking a loan modification on a mortgage or selling property. The IRS has special forms to address these types of situations.
Ultimately, a lien is not good for the taxpayer. Even if immediately paid in full, the lien may still show up. Sometimes, it may be possible to prevent the IRS from filing a lien. If you listen to our firm speak at a conference or on a webinar sometime soon you may find out how… and more 🙂
Submitted by Brad Polizzano on Fri, 03/06/2015 – 16:03