Legal Question in Tax Law in Ohio

Re: Ability to negotiate down tax liens?

I am assuming that this is a federal income tax lien, not a state or local tax lien. If it is not then please ignore this post.

As for the federal income tax lien the first step is to determine if in fact your client owes the underlying tax. In many cases the client owes the tax, but they do not owe the full amount. Even if they owe the full amount it is often possible to reduce or eliminate the tax debt, allowing the tax lien to be lifted. There are a number of ways to reduce or eliminate the tax that you will want to consider -- including bankruptcy, offer in compromise, installment agreement, abatement of penalties and interest, etc. If you can't attack the tax debt then you have to attack the tax lien. This involves examining whether the lien was legal and possibly negotiating with the IRS.

The bigger picture is that if your client does not do something with the underlying tax debt, the IRS will probably attempt to collect the tax via wage/bank garnishments and/or seizing other property (assuming that tax returns were filed and no substantial fraud was involved, there is generally a 10 year statute of limitations which forces the IRS to begin collections activities just before the period expires). I say this because the IRS generally takes the stance that they don't seize taxpayer's homes without first pursuing other assets. Your client may also face the situation where the ex-wife decides to go back and have the divorce court (which probably retained jurisdiction over the case) force your client to pay the tax debt.

You should re-read the divorce decree as the most common provision says that each spouse is liable for taxes (not tax liens) that related to items of income that they receive. It is likely that the divorce decree says that each spouse is liable for tax liens arising from their own items of income. In that case the question becomes whose items of income created the tax debt.

By the way, if the attorney who drafted/negotiated the divorce decree knew of or should have know of this situation and he/she did not include appropriate language then your client may have a cause of action against that attorney (I hate to say that as I don�t know if you happen to be the attorney that drafted the decree).

As always, none of this should be construed as tax or legal advice. You should not rely on this information in any way without contacting an experienced tax attorney. I am not in Cincinnati, but I help clients all over the world with US federal tax controversies. Feel free to call or email if you want to talk.

Sincerely,

Kreig Mitchell

www.irstaxtrouble.com