Lien Subordination: IRS Found Wrong… 3 Years Later

In a tax court opinion out today, ALESSIO AZZARI, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE (136 T.C. No. 9) an IRS appeals officer was found to be wrong for fasiling subordinate a lien on behalf of a business, which owed approximately $1,000,000.00 in back payroll taxes, and needed to factor its accounts receivables to stay afloat.


The opinion relates:


"On or about January 2, 2008, petitioner timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing. Petitioner checked the boxes on Form 12153 requesting that an installment agreement be considered as a collection alternative and that the lien be withdrawn. In the attached explanation, petitioner stated that the lien made it more difficult for petitioner to satisfy its tax liabilities by making it impossible to sell its accounts receivable to a factor."


The settlement officer failed to subordinate a lien under a mistaken assumption that he could not legally do so. The tax court went to great lengths to explain why he could.


What is the impact of the decision? Well, the lien was first requested to be subordinated in June of 2008. Getting close to three years later, it is finally ordered subordinated by the tax court. I wonder what happened to Azzari Inc.'s business? Did it run up more debt? Did he lose his shirt?


These delays in tax court are one of the reasons we try our best to avoid tax court. Most of our clients need solutions in days and weeks, not years.  I am not sure if Azzari Inc.'s attorney tried it (perhaps he did), but one of my moves would have been to file a request for subordination not just with the appeals officer, but with IRS' technical services — a separate division. I have found these folks to be really sharp and helpful. And if that failed, I would have tried a Form 911 with the taxpayer advocate.


If you have a tax issue and aren't sure how to proceed, contact us at 888-727-8796 or email info@irsmedic.com. We can help.