The Number of Tax Liens Filed by the IRS Plummets

Posted on June 18, 2018

What exactly is a tax lien? It typically takes the form of a Notice of Federal Tax Lien – essentially, it’s a notice to the world that you have an IRS problem. It is issued if you owe more than $10,000 to the IRS.

The lien essentially claims the IRS’ priority on your property in relation to other creditors that you may be involved with.

The notice is intended to protect the government’s interest in your assets, including real estate. For example, if you were to try to sell your home without first squaring your debt to the IRS, the tax lien would prohibit or delay the sale of your property. Even if you do complete the sale, the IRS can take the proceeds and pay it towards your debt, up to the amount you owe. A Notice of Federal Tax Lien can even affect your credit – to the point where you may not be able to purchase property like a home or car.

As you can see, the IRS benefits significantly from filing tax liens. Despite this, the number of liens filed by the IRS has steadily declined over the years. For example, in 2010, the IRS filed 1,096,376 tax liens; in 2017, it only filed 446,378, a stunning drop of 59%.

Why the sudden drop? One reason may be the rapid decrease of the IRS’ annual budget. In order to file a lien, the IRS has to pay fee – the IRS literally doesn’t have enough money to file a tax lien for every existing case.

Another reason for the drop in lien filed is the fact that the minimum amount needed to trigger a Notice has increased. This was changed through the IRS Fresh Start program. Through this program, the minimum amount due rose from a $5,000 debt to $10,000. Additionally, the program allows the IRS to choose to not file a tax lien at all, if the taxpayer in question is able to arrange a payment installment agreement. On top of all this, the three major credit reporting agencies have started to leave tax lien data off their credit reports entirely.

There are many good reasons why the number of tax liens filed by the IRS has plummeted. However, in the same amount of time the number of open tax debt cases has exploded.
For example, in 2010, the IRS started its fiscal year with 9.6 million tax delinquent cases. In 2018, the IRS started its fiscal year with nearly 14.1 million tax delinquent cases, a whopping 45% increase.

Do you owe money to the IRS or has the IRS filed a tax lien against you? Call us, we can help.