IRS Notice 1450 Explained
- IRS Notice 1450 provides instructions for requesting a Certificate of Release of Federal Tax Lien, including requesting a payoff, requesting a copy of the certificate, and requesting a certificate of release if the federal tax lien is not released within 30 days of paying the tax liability.
- A tax lien is when an agency secures a legal claim to property or assets to secure payment for tax debt, and a tax levy is a process of actually seizing those assets.
- A tax lien can be removed if the person pays their debt in full, negotiates an offer in compromise, sets up an installment agreement, purchases a bond, discharges their property, undergoes subordination, or if the 10-year collection period ends.
What Is IRS Notice 1450?
Receiving correspondence from the IRS should not be ignored. Sometimes you receive good news, such as being issued a larger tax refund than expected. Other times, a notice is more alarming, especially if you receive a tax demand notice and learn that a collections agency is taking a type of action.
The IRS Publication 1450 is a document that identifies the three steps to having a tax lien released from your accounts.
Tax Lien vs Tax Levy
If someone fails to pay their tax debt, a federal tax lien can be placed to secure a legal claim to the property or assets. If a taxpayer owes money to multiple collections agencies, the one who files the tax lien first has the authority to seize and sell their assets to collect the tax due. The lien is a public document, so if the IRS issues a tax lien, other creditors are alerted of the lien status.
While a tax lien is a legal claim to property or assets, a tax levy is a process of actually seizing the assets. There are several types of assets collection agencies can levy to collect tax payments, including bank account funds, retirement accounts, income, property, cars, and more. Compared to the publicity of tax liens, tax levies are not public records and do not impact your credit score. However, the seizure of assets causes more problems for taxpayers in most cases.
When Will You Receive A Tax Lien?
Before a tax lien is placed on your account, the IRS will issue a notice of your balance due. A tax lien will only be placed if you fail to pay the balance mentioned in the letter or if you fail to pay the entire balance. Notices of tax balances are issued by the IRS at consistent intervals and sent through the U.S. mail system to the last address you have registered on file. It is within these letters that you can view the payoff amount and find information about your options for how to pay the bill.
3 Parts of IRS Notice 1450
The first step describes how to request the payoff amount to have the federal tax lien removed. Once this amount has been paid, the removal process can begin. The second step provides instructions on how to acquire a copy of your Certificate of Release that documents the removal of the tax lien. The third step of IRS Notice 1450 instructs you how to proceed if the lien is not removed within 30 days of submitting the payoff amount.
1. Requesting a Payoff
The first step to having a tax lien released is to learn how much you owe to the IRS and take action to satisfy your tax liability. Tax liability is the payment owed by an individual or business to the IRS or tax authorities. Income tax payable refers specifically to the tax liability of businesses to the government in the area where it operates. If this liability is not paid and they receive this IRS form, they must learn how much they owe.
There are several ways individuals can request their payoff amount:
- Contact the IRS office assigned to their account as listed on the IRS notice and receive the balance over the phone by talking to an agent to get answers.
- Visit the “view your account” page of the IRS site to access their tax record and balances.
- Speak with an agent at the Centralized Lien Operation for guidance or ask a question about their account.
Once you know how much you owe to the IRS, you must find a way to pay what is owed before the tax lien will be removed. If you are in compliance with filing your tax returns, you will more likely have the withdrawal approved. There are a few reasons why a lien can be satisfied:
- If the tax owed is paid in full, the IRS will remove the lien, usually within 30 days of the payment being made.
- If the IRS agrees to a payment plan and you pay regular installments toward that debt, they may remove the lien. For this situation to take place, you must set up a Direct Debit Installment Agreement so the IRS has the right to pull funds directly from your account every month. Even if an installment agreement is agreed upon with minimum monthly payments, interest and penalties will continue to accrue.
- If you purchase a bond that guarantees you will continue to make payments to the IRS for your tax bill, you will be able to ask the IRS to remove the lien from your property. While this removes the lien, you will have to pay for bond insurance, which will increase your overall cost.
- If the IRS agrees to an Offer in Compromise, you may be able to settle your tax debt for less than what was initially owed, and the lien will be removed once the agreed-upon amount is paid. This can help people who don’t have the ability to pay their debt without suffering significant financial hardship.
- According to the Statute of Limitations, the IRS has ten years to file for the collection of taxes due, starting at the date of the tax assessment being issued and not the date of filing the tax return initially. Based on the language of the tax lien, the lien will automatically expire ten years after it was issued.
While subordination does not fully remove the tax lien, it does move it down the priority list for collections. An example of this is if you wanted to refinance your home but there was a lien in place. The IRS may agree to a subordination, so the mortgage company may agree to issue a new mortgage. This could also be a way to get approved for a loan.
Discharge of Property
If you sell your real estate property or transfer it to a new owner, the IRS may consider removing a tax lien. Before the approval, the IRS will evaluate the details of the sale and request a portion or all of the profit from the sale to satisfy the tax balance. There are several provisions that determine eligibility according to the Internal Revenue Code.
2. Requesting a Copy of the Certificate
Once your tax liability has been settled with the IRS, you can request a copy of the Certificate of Release of Federal Tax Lien that provides documentation that the tax debt is settled and the lien can be removed. Once a tax liability has been satisfied, a Certificate of Release is sent to the recording office and a copy will be mailed to your last known address.
If it has been 30 days since your debt has been satisfied and you have yet to receive a copy of the Certificate of Release, you can contact the Centralized Lien Operation by writing, sending a fax, or calling to ask about your case.
3. Requesting a Certificate of Release
You can request a Certificate of Release of Federal Tax Lien if the lien has not been removed within 30 days of settling the tax liability. This request must be mailed in writing to the Collection Advisory Group where they will assess your tax circumstances. The content that should be included in this request is your name, address, phone number, the date of your request, a copy of the Notice of Federal Tax Lien you want to be released, a copy of the payment receipt, and an explanation of why it is in your rights to have the lien removed with anything relevant to the request. If you need the Certificate of Release immediately, you can find your local IRS office by finding the “local contacts” section of the IRS website.
If you have been issued IRS Notice 1450 and need assistance having a tax lien removed, the tax professionals at Ideal Tax can answer your questions and guide you through the process.