[WSBAPT] IRS and creditor claim

Mon Dec 15 14:58:40 PST 2014

Except when you have a problem with the IRS you need resolved and it takes 16+ weeks for an answer.
;-)

I've got an estate right now with a large tax lien for unfiled taxes because all estimated tax payments were made under wife's SS# while income was reported under husband's SS# and they never got around to filing joint returns (or any returns at all). It takes an incredibly long time to sort these things out with the IRS and right now it is holding up the sale of the estate real estate, despite plenty of cash in the estate.

Heather

Heather S. de Vrieze
Attorney-at-Law
[cid:image001.jpg at 01D013C2.30F35160]
3909 California Avenue SW
Seattle, WA 98116-3705
(206)938-5500
heatherd at westseattlelaw.com<mailto:heatherd at westseattlelaw.com>
www.westseattlelaw.com<http://www.westseattlelaw.com/>

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Roger Hawkes
Sent: Monday, December 15, 2014 2:31 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] IRS and creditor claim

That is funny:) usually the governments threaten to lay off workers who everybody loves, like police and fire and music teachers etc.  I don't imagine there will be much public outcry about laying off IRS workers.

Roger Hawkes, WSBA # 5173
19909 Ballinger Way NE
Shoreline, WA 98155
www.hawkeslawfirm.com<http://www.hawkeslawfirm.com>
206 367 5000
Fax is 206 367 4005

From: Sam Furgason [mailto:sam at furgasons.com]
Sent: Monday, December 15, 2014 2:20 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] IRS and creditor claim

I haven't been reading this thread, so this may have already been mentioned, but I recall seeing a couple of TV news stories recently where the IRS actually seized the bank funds of decedents' grandchildren decades after the alleged tax debtors' deaths. Might have even included other relatives who never received anything from the tax debtors' estates. It was made much of by the anti-IRS political crowd.
On the other hand, in the $1.1 trillion budget bill just passed by Congress (Obama says he will sign it), the IRS budget was reduced by a big enough amount that the agency claims it will have to lay off a whole bunch of people. FWTW.
S

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Tara
Sent: Monday, December 15, 2014 1:20 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] IRS and creditor claim

The Internal Revenue Manual (IRM), Part 5 Collecting Process is a great resource, especially section 5.5 on Decedent Estates and Estate Taxes
http://www.irs.gov/irm/part5/

Section 5.5.2.4 of the IRM states that "A state statute may not subordinate a federal tax lien to interests that Congress has not specifically permitted to prime the lien.  State law is nullified to the extent that it conflicts with federal law."
Section 5.5.2.6 states that the IRS considers the family allowance an administrative expense of probate that the Service may *in its discretion* permit.

The federal tax lien is created by operation of law, 26 USC 6321, and the collection period and assets subject to collection are usually determined according to the date that the tax is assessed.  The Notice of Federal Tax Lien (NFTL) and the date of its recording deal more with priority against other secured-type creditors.  "The filing of a NFTL is not a step required to give rise to or to perfect the lien against the taxpayer. The act of filing protects the Government's right of priority as against certain third parties, typically a purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor. IRC § 6323(a)."  IMR 5.17.2.3.1.

Also, IRM 5.5.3.6 is helpful describing the priority of the tax with regard to estate property, based on the date of the tax assessment:
If assessment is made:            - Then the assessment lien attaches to:
before death   - property owned by the taxpayer and follows property into probate or to the transferee.
after death      - any probate property in the taxpayer's estate at the time of assessment.

Litigation on the decedent's Federal tax liability against the IRS will probably lead you off into Federal District Court to get an order binding against the Service.  On the other hand, I've talked to revenue agents that are just as confused by the probate process and collection priority as the rest of us are confused by the tax laws.  Negotiating with a local revenue agent or collection officer for an allowance for the surviving family will probably get you further and get more reassurance for the heirs, especially since collection efforts can follow to property in the hands of the transferee.

Good luck!
Tara M. Roberts
Puget Sound Law
roberts at pugetsoundlaw.com<mailto:roberts at pugetsoundlaw.com>

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Marcus Fry
Sent: Monday, December 15, 2014 11:47 AM
To: 'wsbapt at lists.wsbarppt.com'
Subject: [WSBAPT] IRS and creditor claim

IRS has filed a late creditor claim in probate proceeding (no real property to lien).  Is the IRS subject to our 4-month creditor filing bar?  If not, anyone successfully litigate a family allowance claim to trump the debt owed to the IRS?

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
P.O. Box 1689
Yakima, Washington  98907
Telephone:  (509) 248-7220
Facsimile:  (509) 575-1883

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