Lien Subordination & Tax Resolution Services – FAQs

A federal tax lien provides notice of your and/or your business’s liability to third parties (including your lender), secures the government’s interest on your business’s assets (real and personal property), and establishes priority. A federal tax lien does not divest a taxpayer of his or her property or rights to transfer property (it does not do the “taking”). Instead, a levy does the divesting. Before a Revenue Officer can issue a levy, the IRS must first issue a Final Notice of Intent to Levy and provide the taxpayer with 30 days to appeal. If 30 days pass without a resolution or an appeal by the taxpayer, the Revenue Officer may proceed with enforced collection (levies on the taxpayer’s bank accounts and/or accounts receivable). Importantly, the IRS does not have to record a notice of federal tax lien before it can pursue enforced collection activity.

Before the IRS can levy bank accounts or receivables, the IRS must issue a specific document providing a “final” warning to the taxpayer. This document is the “Final Notice of Intent to Levy,” which is frequently seen as Letter 1058 or LT 11. However, once the Final Notice of Intent to Levy has been issued, taxpayers are not entitled to or typically provided with additional warnings.

When lenders fund in second position behind a federal tax lien, they are exposed to the IRS in the form of levy and conversion. As such, lenders generally stop funding on or before the 45th day from the date the federal tax lien was filed if the underlying liability is not resolved in the proper manner.

Tax Guard’s resolution services are designed to prevent that outcome. We understand the sense of urgency and the additional steps needed to protect your lender, which allows us to preserve the funding relationship. When federal tax issues arise, don’t wait for the IRS to file a federal tax lien or issue levies. Be proactive. Speak with a Tax Guard specialist today.

The 45-day rule is an exception to the general rule of priority (which is “first in time, first in right”). Once a federal tax lien is filed, the IRS moves into first position on any revolving assets – inventory and receivables – on the date the lender acquires actual knowledge of the lien, or 45 days from the date the lien is filed, whichever is earlier. The lender’s potential exposure is the total amount of the liability subject to the federal tax lien.

Watch our video to learn more about the 45-day rule and why lenders care about their client’s IRS liabilities.

Many lenders and consultants, even business owners themselves, put too much emphasis on the total amount owed to the IRS. They see a substantial liability and conclude there is no way the IRS will allow the business to continue operations. This assumption is incorrect. If your business can become and remain current and compliant, Tax Guard can negotiate an installment agreement with a payment the business can afford, regardless of whether the amount owed is $100,000 or $1 million or $10 million.

Watch our video to learn why 95% of all installment agreements with the IRS fail and why Tax Guard’s success rate is so much higher (hint: we base the payment on what the business can afford).

No! Generally, when your business owners (or their consultants, attorneys, and/or accountants who don’t deal with the IRS Collections Division on a regular basis) first speak with the IRS, their first question is, “What will it take to make this go away?” This allows the IRS to frame the issue, and they frequently respond with “25 percent down and the rest paid within two years” or something similar. Business owners frequently agree to those terms because they believe they have no alternative. A large down payment combined with a large monthly payment will create problems with cash flow, the agreement will terminate, and then the business will be in worse shape than before.

There is no basis for the idea that the IRS requires 25 percent down and the remainder paid within two years. In fact, it’s the exact opposite. The Internal Revenue Manual indicates, “Installment agreements must reflect taxpayers’ ability to pay on a monthly basis throughout the duration of agreements.” The amount of the monthly installment payment should not be based on the size of the liability or an arbitrary time frame. Rather, the monthly payment should reflect an amount the business can afford, which will substantially decrease the likelihood that the agreement will terminate.

Watch our video to learn why 95% of all installment agreements with the IRS fail and why Tax Guard’s success rate is so much higher (hint: we base the payment on what the business can afford).

No. The IRS’s ability to collect delinquent taxes is not infinite. Rather, it’s limited by a statute of limitations, which is generally ten years. Once the statute of limitations expires, the IRS can no longer collect the debt. At that point, you can stop making the monthly installment payment.

Watch our video to learn why 95% of all installment agreements with the IRS fail and why Tax Guard’s success rate is so much higher (hint: we base the payment on what the business can afford).

It varies. There are a couple factors that are beyond Tax Guard’s control. The first is whether there is a revenue officer assigned to the case. If there is no one for Tax Guard to speak with at the Internal Revenue Service, the process can take a little longer. The second is whether the business is making the current federal tax deposits in full and on time. If tax liabilities continue to accrue and the business has not yet “stopped the bleeding,” the IRS or state taxing authority will not enter into an agreement. However, when there is a revenue officer assigned to the case and the business is current and compliant with the tax deposits, the typical time frame is approximately 30 days. It can take more or less time depending on a number of other factors.

Absolutely. There are generally three reasons why a subordination of federal tax lien is rejected.

1. The application may be premature. A prerequisite for a subordination of federal tax lien is an Installment Agreement in good standing.
2. There may be compliance issues. The IRS will not approve a subordination request unless your client is current and compliant with its deposit and filing requirements.
3. The application may be incorrect. There is specific information required to be submitted with the subordination application, and the instructions included with the IRS’s subordination application form are not terribly helpful.

Tax Guard’s unique understanding and experience with these issues enables us to overcome them in securing subordinations for our clients.

When federal tax issues arise, don’t wait for the IRS to file a federal tax lien or issue levies. Be proactive. Speak with a Tax Guard specialist today.

Generally, subordinations are not indefinite. Typically, a subordination is effective through a specific date or for a specific time frame (three to twelve months), which is set forth in the subordination documentation. The Internal Revenue Manual indicates: “The subordination must be for a period no longer than one year.”

Absolutely. When federal tax issues arise, don’t wait for the IRS to file a federal tax lien or issue levies. Be proactive. Speak with a Tax Guard specialist today.

Please review Tax Guard’s success stories and examples of our recent work.

There are a lot of representatives out there (local attorneys, local accountants, and tax resolution companies), but even those that are good at representing their clients before the IRS (most are not) generally do not understand lenders’ priority concerns and/or do not regularly update the lender. At Tax Guard, we specialize in resolving issues with the IRS (and/or state taxing authorities) for businesses that work with banks, asset-based lenders, and factors. We have a unique understanding of lenders’ concerns and what is needed to preserve your funding relationship. Additionally, while you are our client (not the lender), we’ll answer your lender’s questions and keep them updated on the progress of our negotiations. We take on the burden of explaining the IRS to your lender. We protect you, we protect your lender, we preserve funding.

When federal tax issues arise, don’t wait for the IRS to file a federal tax lien or issue levies. Be proactive. Speak with a Tax Guard specialist today.

Tax Guard’s fee is based on three criteria:

• Amount of the liability
• Work involved
• Sense of urgency

Because every situation is different, you will need to speak with a member of our Resolution team to review the situation in more detail. During the initial conversation, which is complimentary, we will provide a description of the services Tax Guard offers as well as the associated fee.

When federal tax issues arise, don’t wait for the IRS to file a federal tax lien or issue levies. Be proactive. Speak with a Tax Guard specialist today.