federal tax liens

[nancylynn]

What is the name of your state? CT

Why would a person who was not working for two years in a row receive 2 federal tax liens? Person had no investments etc. Had inherited money which had already been taxed- at least that is what he was told.

[irsos]

Originally Posted by nancylynn

What is the name of your state? CT

Why would a person who was not working for two years in a row receive 2 federal tax liens? Person had no investments etc. Had inherited money which had already been taxed- at least that is what he was told.

Liens could be for earlier years, person could be mistaken, could have inherited IRA's which would have been taxable, etc.

[LdiJ]

Originally Posted by irsos

Liens could be for earlier years, person could be mistaken, could have inherited IRA's which would have been taxable, etc.

The person would have also had multiple letters from the IRS before it got anywhere near the point of a tax lien.

The person in question should request income transcripts and account transcripts from the IRS for the years in question, to see what income the IRS is attributing to them, and what tax the IRS is attributing to them.

Identity theft is also a possibility.

[nancylynn]

Here is the situation. He inherited quite a bit of money in 2005-2006. All was coverted to cash and estate checks were signed to him. The attorney stated he had taken care of the inheritance/estate tax.

Well, he also inherited by late father's membership in a beach club association which one could rent for some 12,000-14,000 a summer or own. It the time it was worth around 200,000. Although I advised him to hold on to the units as an excellent investment (you could join this club in 1972 for $200) he sold them. The taxes were paid as were the association's dues.

He put about half of his inherited money into CD's.

Son took aff travelling starting January 2006 - all over the country. He did not buy any property or home. He did not work. It seems he spent most everything he inherited. (Although he has been reluctant to admit what he has left.)

However, he has never lived in Texas. He drove through Texas, but never settled there. Stayed a few nights in a motel. He is still travelling.Now with girlfriend in tow. His father is a college professor in Maine and that is where all my son's mail has been going. They are in frequent communication.

I'm just really dumbfounded that he has federal tax liens. He did NOT take a job- so when I talk to him what should I tell him to do- consult a tax attorney ASAP? Or contact the IRS and see why he has the liens? I don't fully understand how you get a lien except if you do not file your taxes and you owe. Since the attorney filed the estate/inheritance taxes, why would my son have these two liens? Thank you!

[xylene]

What does texas have to do with this?

One does NOT need to have a job to owe income taxes.

Interest is income.

Captial gains... etc.

If son did not file and did not pay, he will have this trouble.

PS - I assume son is an adult? If so this is his problem and while being a helpful parent is thoughtful, absent explicit permission you have no grounds to be talking to the IRS or reading his mail about this and might unintentionally make matters worse.

[LdiJ]

Originally Posted by nancylynn

Here is the situation. He inherited quite a bit of money in 2005-2006. All was coverted to cash and estate checks were signed to him. The attorney stated he had taken care of the inheritance/estate tax.

Well, he also inherited by late father's membership in a beach club association which one could rent for some 12,000-14,000 a summer or own. It the time it was worth around 200,000. Although I advised him to hold on to the units as an excellent investment (you could join this club in 1972 for $200) he sold them. The taxes were paid as were the association's dues.

He put about half of his inherited money into CD's.

Son took aff travelling starting January 2006 - all over the country. He did not buy any property or home. He did not work. It seems he spent most everything he inherited. (Although he has been reluctant to admit what he has left.)

However, he has never lived in Texas. He drove through Texas, but never settled there. Stayed a few nights in a motel. He is still travelling.Now with girlfriend in tow. His father is a college professor in Maine and that is where all my son's mail has been going. They are in frequent communication.

I'm just really dumbfounded that he has federal tax liens. He did NOT take a job- so when I talk to him what should I tell him to do- consult a tax attorney ASAP? Or contact the IRS and see why he has the liens? I don't fully understand how you get a lien except if you do not file your taxes and you owe. Since the attorney filed the estate/inheritance taxes, why would my son have these two liens? Thank you!

Ok...let me give you some examples so that you can understand how there might be taxable income associated with an inheritance.

Lets say that someone inherits an IRA. There is no estate or inheritance tax because the value of the total assets of the estate is below the federal and state estate/inheritance tax levels.

If the person inheriting the IRA rolls it over into an IRA of their own, they also pay no regular income tax either. However, if they cash in the IRA then it becomes regular taxable income to them (no penalty applies however) just like it would have been regular taxable income to the person they inherited it from.

Another example:

Lets say that a chunk of the inheritance is in stocks. Again, there is no inheritance/estate taxes because its below the levels, but if the stocks are cashed out then again, regular tax applies....because it would have applied if the person who died had sold the stocks.

So yes, there can absolutely be income tax associated with an inheritance, even if there is no estate or inheritance tax due.

And if someone blows off the IRS, or a state that has jurisdiction over certain assets, then tax liens can absolutely happen.

[Dandy Don]

The estate taxes that the attorney paid are separate from any tax amounts that may be due and payable by your son (if he in fact owes anything). Yes, he needs to consult a tax attorney for advice but first if he has no information about the federal tax liens he should go online or visit his county courthouse or the website of the federal court in his area to search court records in his name where there should be a record of the liens so that he can go to the courthouse to look at the documents himself if he wishes to.

[nancylynn]

Thank you. I will tell him he needs to act promptly.