10 Yr Expiration of Fed Tax Lien

I have a friend who had a Federal Tax lien filed in his county of residence. The last day of refiling this lien(10 years later) occurred in the 2021 calendar year and as such operated as a certificate of release. Am I correct in assuming that he can now sell property(non-homestead) and the title company will not have to withhold sales proceeds to satisfy this debt? Is this Federal tax debt forgiven and if so would he receive a Form 1099-C in January 2022? If so would the 1099-C include just the original principal amount or would accrued interest & penalties be added? If the debt is not forgiven would it be subject to recapture in his estate upon death?

You can forget about a 1099-C. It is only issued when a lender forgives a debt. The IRS didn’t lend money here. While the lien will release after 10 years, you have to be careful about the dates. The IRS has 10 years from the date of assessment to collect on a tax debt, but there are a number of events that toll (extend) the 10-year clock. You need to determine the Collection Statute Expiration Date (CSED). The original CSED is listed on the account transcript for the tax year which created the debt. Tolling events are also posted to the transcript, but tax representation professionals know that many of these entries are wrong. (There have been systemic errors in IRS exam functions.)

This is best addressed by an Enrolled Agent (EA) or CPA with tax representation (not preparation) experience who can review the documentation and determine the actual CSED date.

If the lien is still collectible at the date of death, the Estate will have to pay it. The IRS generally has priority over other creditors.

Ira

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