Why yes, yes, the IRS will do just that. I've written previously about the destruction that a Notice of Federal Tax Lien causes to one's credit score, and the harm done to the economy.
Today, as I was reviewing Federal Tax Liens recently filed in the State of Connecticut, I couldn't help but notice one very, very small lien in this batch —- which came in at $61.00. For those unaware of collection procedures, tax liens are used for securing large amounts of debt. I couldn't help but wonder why they would bother filing a lien for only $61.00.
The Overly-Aggressive IRS
So, some taxpayer owed the IRS $61.00. Instead of writing it off as bed debt, intercepting refunds, making a collections call, or sending a bill, someone at the IRS was so passionate about collecting this $61.00 that they filed a lien — in the public land records.
You see, the recording fee for any one-page document, such as a Federal Notice of Tax Lien, in my great State of Connecticut is $53.00. It's set by statute and is uniform throughout each town. So the IRS has to pay $53.00 to record a $61.00 lien.
Well, you may think, once the IRS gets the $61.00, it will make a tidy little $8.00 profit. But let's talk about that. The IRS pays $53.00 to collect $61.00. Not a great return, but at least positive, right?.
Once a Federal Tax Lien is paid in the full, the IRS must filed a Federal Tax Lien Release. And guess what the fee is to record, at least in Connecticut? That's right, another $53.00.
So, we will subtract $53.00 from the $8.00 previous realized, which leaves the IRS loss of $45.00. That is, the IRS lost $45.00 by filing a $61.00 tax lien.
What happens if the IRS doesn't collect anything from the taxpayer? Well, in that case, the IRS doesn't have to spend that second $53.00 to release the lien, but it did have top pay to record the lien — meaning the IRS lost $53.00 by filing a $61.00 tax lien.
The affect on the taxpayer
From our experience, that little itty-bitty tax lien probably cost that taxpayer 80 points on their credit score. If you are concerned about a federal tax lien, contact us for assistance. Call 888-727-8796 or email email@example.com.