Income Tax Lien situation -- WWYD

[Ummto4]

This is for my friend - not for me. Please don't quote as I may delete later. 

 

A friend of mine doesn't pay the family's state income tax in full for a couple of years. So far the tax + accrued interest amounts to $17K. Now, they want to close a home. This home is a rent to own situation, where they pay the downpayment as rent for a couple of years. It's clear that the owner/landlord  wants to sell the house and after the threshold for downpayment is reached, the landlord wants to sell. They're due to close the middle of this month and the landlord really wants the house to sell. IF not, they have to find a new place. Now, because of the tax lien situation, by law, they are not allowed to close. This means that their rent money/downpayment is lost. So this family wants to borrow money from a couple of friends to settle the tax lien situation. Plus they're trying to get a certificate from the tax office saying that they actually pay tax regularly (but not in full) so that hopefully they're allowed to close.

 

I'm worried that they actually cannot afford to own a house. First, they have this $17K owed to the state, and on top of that they have to regularly pay the current tax. Plus, if they own a home, they will have to pay for the property tax + upkeep . I don't see how they can pay all those extras. 

 

This is a family of 7, btw -- 5 kids. They live in a high COL city.

 

WWYD ? Is it possible to have the tax lien reduced/forgiven ? Or at least get the interest waived ? 

 

TIA

Edited April 13, 2016 by Ummto4

[ErinE]

:grouphug: As difficult as their financial situation might be, they really need to find a lawyer who specializes in tax liens.

[Lanny]

Question: Would the current owner then hold the mortgage on the home?  If not, I seriously wonder if they could qualify for a mortgage from a regular lender at conventional rates. They would probably need to pay sub standard rates, but I am assuming that and I may be wrong. Their Credit record probably has information about this.  Since it is a tax lien, to a state, I suspect that it might not be discharged in a Personal Bankruptcy case.   I think they should run this by a Bankruptcy Attorney.  Their reason(s) for not fully paying their State Income Tax liability might enter into the considerations a lender would look at.

Edited April 14, 2016 by Lanny

[zoobie]

They need legal advice, not internet advice. If they're asking you for money, no, they're not a safe bet. Don't get involved financially or otherwise. Think of some supportive, noncommittal responses and practice them. Wow, that's a tough spot. I'll be thinking/praying about you.

[Ummto4]

Just look at bankruptcy and yes, lien survives bankruptcy. 

[Ummto4]

They need legal advice, not internet advice. If they're asking you for money, no, they're not a safe bet. Don't get involved financially or otherwise. Think of some supportive, noncommittal responses and practice them. Wow, that's a tough spot. I'll be thinking/praying about you.

I actually advise her to move out to a cheaper place as I don't think they can afford to buy a home with property tax and all. 

 

Well, I actually didn't say that way. I just asked her to think the consequences of home ownership. 

[Lanny]

If somehow they managed to Close on the house, could the State then seize it for the tax lien?  The house would be an asset that the State could seize and then sell, to pay the tax lien.  I suggest they find an Attorney who specializes in Bankruptcy and offers a Free initial visit and discuss their situation with him/her.    As a PP mentioned, the OP should NOT lend any $ to them.  If the house is located in a State where there are "Homestead Exemptions" they may not be able to get one for this house, because of the

tax lien.   GL to them! 

[Ummto4]

If somehow they managed to Close on the house, could the State then seize it for the tax lien?  The house would be an asset that the State could seize and then sell, to pay the tax lien.  I suggest they find an Attorney who specializes in Bankruptcy and offers a Free initial visit and discuss their situation with him/her.    As a PP mentioned, the OP should NOT lend any $ to them.  If the house is located in a State where there are "Homestead Exemptions" they may not be able to get one for this house, because of the

tax lien.   GL to them! 

Yes, I told her about the possibility of her house being seized by the state because of the tax lien. Actually, I said to her gently (indirectly) to really think about just cutting her loses in rent, move out, find a cheaper place, and increase the income. 

Edited April 14, 2016 by Ummto4

[Lanny]

IMO the rent they have paid is not lost. They have had a house to live in while paying that rent.  What is lost is the opportunity to Close on the house, because of the Tax Lien, which is their BIG problem at this time.  Any assets they own might be seized, to pay the tax lien.  Cars, etc.

[Ummto4]

IMO the rent they have paid is not lost. They have had a house to live in while paying that rent.  What is lost is the opportunity to Close on the house, because of the Tax Lien, which is their BIG problem at this time.  Any assets they own might be seized, to pay the tax lien.  Cars, etc.

Lanny -- do you know whether people in rent-to-own situation pay more rent than people in normal rental situation ? If yes, I can understand the regret -- like losing opportunity PLUS extra rent money. If not, then yes, they're just losing the opportunity, but not really losing money. 

[BlsdMama]

State or federal tax? Are they low income?

[Ummto4]

State or federal tax? Are they low income?

State.

 

Wife works as a nanny (daytime only). Plus husband and wife do two paper routes. Husband doesn't work anything else (he's older, but the wife is 40-ish). I don't know why the husband doesn't work. They also do face painting for parties occasionally and sell knicks and knacks (whatever they can find) in a local FB group (kinda craigslist group).  So I guess they're low income.  

[gardenmom5]

They should consult a tax attorney. I would not loan any money I wasn't prepared to kiss goodbye.

[SereneHome]

Why not contact the state and see if they can have a payment schedule established?

 

Despite popular believe govt agencies don't like or want owning any properties - they like cash!  So, call DOR and arrange a payment plan.  The bank will just consider that their debt in their debt/income ratio.

 

Now - whether they can afford the house to begin with is a whole other story

[Lanny]

Lanny -- do you know whether people in rent-to-own situation pay more rent than people in normal rental situation ? If yes, I can understand the regret -- like losing opportunity PLUS extra rent money. If not, then yes, they're just losing the opportunity, but not really losing money. 

 

 

I suspect that varies, from house to house.  I also suspect that an Owner, who offers Rent to Own to a Tenant, has a property that is very difficult to sell or is in a market where houses are not selling.  I have never been in a rent to own situation, but I remember seeing adds for them.  

[Lanny]

State.

 

Wife works as a nanny (daytime only). Plus husband and wife do two paper routes. Husband doesn't work anything else (he's older, but the wife is 40-ish). I don't know why the husband doesn't work. They also do face painting for parties occasionally and sell knicks and knacks (whatever they can find) in a local FB group (kinda craigslist group).  So I guess they're low income.  

 

 

With that knowledge, I doubt they would be approved for a conventional mortgage, at the best rates, unless the wife's salary is quite high,  AND they had excellent credit.  With the Tax Lien, their Credit Report is probably blemished.    

[G5052]

They should consult a tax attorney. I would not loan any money I wasn't prepared to kiss goodbye.

 

At that level of income, they may be eligible for help from the legal aid society or some such. A lot depends on the terms of the lien and how the state handles it.

 

If they're that behind, borrowing is only going to be a short-term solution, and anyone loaning to them can't count on quick repayment.

Edited April 14, 2016 by G5052

[bettyandbob]

They probably have to forget the house and find new housing. They need to go to a legal aid group or a nonprofit tax group that deals with this stuff and get on a payment plan. Some of these groups are able to negotiate persons out of some of the interest and penalties if they get and stay on a payment plan.

 

I would not "lend" money. 1) because if they work with someone they probably won't have to pay it all, so it would be a waste. 2) these people do not sound like people who would actually pay me back and I don't have enough to give away to make a difference. 3) it sounds like this family has (or could have) a lot of risk factors that are not being managed, not a good situation for buying a house.

[Alessandra]

I'm curious as to how the state tax amount is so high. In my state, which has a high income tax, I would have to have a fair amount of income to owe that much in tax, even over several years. And deductions for a large family would lower income. Did the family have more substantial income at some point, perhaps from the sale of a house? Or would interest and penalties accrue fast enough to get to the amount?

 

Maybe someone can explain if I am wrong, but something feels off to me.

[zoobie]

I'm curious as to how the state tax amount is so high. In my state, which has a high income tax, I would have to have a fair amount of income to owe that much in tax, even over several years. And deductions for a large family would lower income. Did the family have more substantial income at some point, perhaps from the sale of a house? Or would interest and penalties accrue fast enough to get to the amount?

 

Maybe someone can explain if I am wrong, but something feels off to me.

All kinds of red flags. It sounds high to me as well, especially coupled with their income level. Nanny job and face painting are likely cash under the table. That adds in federal tax issues if they're underreporting income. I wouldn't want the details of this shady mess! Run away!

[Alessandra]

All kinds of red flags. It sounds high to me as well, especially coupled with their income level. Nanny job and face painting are likely cash under the table. That adds in federal tax issues if they're underreporting income. I wouldn't want the details of this shady mess! Run away!

Good point. I can imagine people paying tax on their (declared) earned income, but not realizing that cash income counts, as do capital gains, inheritance, settlement from a lawsuit, severance pay, etc. I am not sure how college loans work in terms of taxes? Perhaps they had an inheritance in another state with negligible tax, paid fed taxes and one state, forgot about their state of residence? I can see how that could happen.

 

I love puzzles and am spending way too much time on this, lol.

[Jean in Newcastle]

Racking up that amount of tax debt over time means (as you said) that this problem has been going on for a long time without making any changes.  It doesn't seem to have really sunk in if they are trying to buy this house.  In my opinion, that is what needs fixing first. 

[Ummto4]

All kinds of red flags. It sounds high to me as well, especially coupled with their income level. Nanny job and face painting are likely cash under the table. That adds in federal tax issues if they're underreporting income. I wouldn't want the details of this shady mess! Run away!

 

I don't know. I don't live in a state with state tax but another friend of mine told me that state tax is lower than federal tax. IT could be a combination of fines, interests, and principal. 

 

The wife actually was just married to this man for 6 years. She was a housewife in her previous marriage. So I can think of these possibilities:

- they got audited.

- the debt was accumulated by the husband prior to marriage to the wife. So may be it's been like that for so many years -- in that the husband never pays state in full. I don't know what the husband's previous occupation is, but I know he only works part time now. 

 

Btw, I messaged her and told her to investigate the possibility to have some parts of the debt forgiven and to get the couple into the state payment plan. I showed her that IRS had a scheme for that and if they agree to a direct debit payment plan, then the delinquent status will be lifted. It's just going to be treated as debt, not lien/delinquency. So I told her that  it's possible that the state has the similar scheme.

 

She said that today the husband would go with another friend to ask the state to waive the interest. And ... this is interesting. She told me that they've already got into the payment plan but the  collector agency changed and they missed the payment. I asked her what she meant with the payment plan -- is it the debt payment plan, or current tax payment plan (like installment plan). She hasn't answered. But really, if the problem is because of the technicalities of debt payment plan and is caused by the change of the  collector agency, then what's the problem ? They just need to pick up the phone and that would release them from the delinquent status. 

 

I only know this detail this morning when I suggested to her more actions and probed her more. Before, she just said she needed 17K to pay for the back taxes, otherwise they won't close. IF I were her,it's much simpler to just rectify the problem with the  collector, rather than asking friends for 17K, right ? 

 

Oh and she said that her mortgage term is normal - it's fixed and the rate is the same as her neighbor's. 

 

So far what I can deduce is this:

--> they got in trouble because they missed payments which was caused by the change in debt collector. So I assume that before that happens, they had debts but didn't have the tax delinquency/lien status. So may be their mortgage was approved before they earned the tax lien status, and that's why the y managed to have a normal mortgage. But then -- why she asked for 17K instead of just picking up the phone ? 

 

PS: I just realized -- she said collector agency, not debt collector. So may be they have payment plan for paying current tax, not the debt. 

Edited April 14, 2016 by Ummto4

[Ummto4]

Good point. I can imagine people paying tax on their (declared) earned income, but not realizing that cash income counts, as do capital gains, inheritance, settlement from a lawsuit, severance pay, etc. I am not sure how college loans work in terms of taxes? Perhaps they had an inheritance in another state with negligible tax, paid fed taxes and one state, forgot about their state of residence? I can see how that could happen.

 

I love puzzles and am spending way too much time on this, lol.

I think they've been living in the same area for a long time. The hubby has his family there. The wife is a green card holder. But then their state is small, so it is possible that even if they only move around in that area, they could be at some point of their life live in different state.

[gardenmom5]

boy, does this rat smell.  I'd point her in the direction of agencies that can help her, but absolutely wouldn't give a dime.  (because it would be "give" - you'd never see it again.)

[Jean in Newcastle]

She's looking for people to fix their problem without doing anything themselves - or at least, not enough.  Is language a problem to them understanding the financial responsibilities that they have?  I know that once something like this snowballs, then it can seem overwhelming. 

[brehon]

I'm sorry. There are things so off with this story that my head is spinning. Does this woman *actually* know what's going on with their finances, is she just repeating what she was told by her dh, or what? The things she is saying don't even make any sense.

[zoobie]

I think they've been living in the same area for a long time. The hubby has his family there. The wife is a green card holder. But then their state is small, so it is possible that even if they only move around in that area, they could be at some point of their life live in different state.

Whoa. Green card puts this in a whole different ballgame. She definitely needs an attorney and the house closing should not be her primary concern. I doubt you will get the full story from her. Especially not over instant messages from far away. It's nice of you to be concerned, but you're not going to be able to resolve this.

[QueenCat]

Good point. I can imagine people paying tax on their (declared) earned income, but not realizing that cash income counts, as do capital gains, inheritance, settlement from a lawsuit, severance pay, etc. I am not sure how college loans work in terms of taxes? Perhaps they had an inheritance in another state with negligible tax, paid fed taxes and one state, forgot about their state of residence? I can see how that could happen.

 

I love puzzles and am spending way too much time on this, lol.

 

I don't get how people could not know. The forms ask you, step by step, about the different forms of income. And if you use decent software, it's easy. That said, I'm wondering if a big part of what they owe might be due to the penalties and interest added in.

[Ummto4]

Whoa. Green card puts this in a whole different ballgame. She definitely needs an attorney and the house closing should not be her primary concern. I doubt you will get the full story from her. Especially not over instant messages from far away. It's nice of you to be concerned, but you're not going to be able to resolve this.

The husband is a US Citizen, white, native english speaker. The wife speaks English well, but not native. I think by just searching internet they should know what to do to ask for help. But yes, as the story evolves, I'm becoming more and more confused. 

[brehon]

Go with that feeling. You're confused because, for whatever reason, you're not hearing anything even approaching the real story.

[Ummto4]

Go with that feeling. You're confused because, for whatever reason, you're not hearing anything even approaching the real story.

 

She didn't give enough details. May be that's to spare us from confusion.

 

At the end, I think it's a duty of a friend to counsel and help solving the problem. I think most people from my ethnic group, when asked to lend money to a friend, will lend out of goodness. But then that's not necessarily the best solution. Like in this case -- what good will come out from lending this family 17K collectively ? If this act of lending makes the family more burdened financially (by enabling them to close), then lending would actually cause more harm.   The thing is most people are afraid to probe further because of privacy issue. But the people involved sometimes don't understand the consequences because their emotions are already involved. Or may be the people don't know the complete picture. 

 

Btw, my husband has already said no. Not to them, but we talked about it last night. 

[Ummto4]

I don't get how people could not know. The forms ask you, step by step, about the different forms of income. And if you use decent software, it's easy. That said, I'm wondering if a big part of what they owe might be due to the penalties and interest added in.

Right, I think a huge chunk of that 17K is fine and interest. 

 

One thing I don't understand -- does the government use a collection agency to collect payment from those in a payment plan ? I know with the federal tax, the self-employed can pay tax to IRS directly. SO basically I'm still confused whether the payment plan is for the current tax or the money they owe. 

Edited April 14, 2016 by Ummto4

[QueenCat]

Right, I think a huge chunk of that 17K is fine and interest. 

 

One thing I don't understand -- does the government use a collection agency to collect payment from those in a payment plan ? I know with the federal tax, the self-employed can pay tax to IRS directly. SO basically I'm still confused whether the payment plan is for the current tax or the money they owe. 

 

I'd be surprised if a state did this using collection agencies. And if they did, they'd have pretty strong parameters set when there was a change so that people wouldn't just stop getting the info needed to pay their payments. I think your friend's dh isn't telling her everything she needs to know.............

[Carol in Cal.]

If they are not paying the government, what makes you think they would pay you?

[zoobie]

Right, I think a huge chunk of that 17K is fine and interest.

 

One thing I don't understand -- does the government use a collection agency to collect payment from those in a payment plan ? I know with the federal tax, the self-employed can pay tax to IRS directly. SO basically I'm still confused whether the payment plan is for the current tax or the money they owe.

Some states do. Feds do not. You can google her state to find out if you're really curious. It's more rubbernecking a disaster at some point though.

[Tsuga]

I guess my question is how could they close on a house in this case? What bank will loan with their credit? Or am I missing something? They need to pay that off for "good credit"? Their credit is still going to look like a disaster.

[Ummto4]

I guess my question is how could they close on a house in this case? What bank will loan with their credit? Or am I missing something? They need to pay that off for "good credit"? Their credit is still going to look like a disaster.

 

She said her mortgage is fixed rate with the rate comparable to her neighbors. I didn't probe further -- whether she got a loan from a bank or from her landlord. If it's from her landlord, it makes sense. Especially if it's been difficult for the landlord to sell the house. If it's from the bank .. I don't know. May be her lien case just came up v. recently after the mortgage paper has been approved ? She said that they weren't in trouble before because they're on payment plan (not clear what payment plan ... current tax or back tax), but because of the change of the collector agency, they missed the payments and suddenly got a lien notice. 

[QueenCat]

She said that they weren't in trouble before because they're on payment plan (not clear what payment plan ... current tax or back tax), but because of the change of the collector agency, they missed the payments and suddenly got a lien notice. 

 

This is the part I'm not buying. They KNEW they had payments to make. If they suddenly weren't getting statements, then they KNEW they needed to call someone at the state because they KNEW they still owed the money and NEEDED to make their payments. You don't get a lien after one or two missed payments. At least not right away. Glad your dh is not willing to give or loan them money.

[Ummto4]

This is the part I'm not buying. They KNEW they had payments to make. If they suddenly weren't getting statements, then they KNEW they needed to call someone at the state because they KNEW they still owed the money and NEEDED to make their payments. You don't get a lien after one or two missed payments. At least not right away. Glad your dh is not willing to give or loan them money.

 

Right, even with direct debit on bills, I usually get the monthly receipt. I have an impression that her dh doesn't take care of the financial problem properly.

 

 I have another friend who just found out that they got a 4K bill from an online game company. Apparently their son has been subscribing to a game membership site without him realizing. He said he just did the trial version but didn't care to cancel the plan (or forget) after the trial period finished. The husband was supposed to check on their monthly bank statement, but didn't do the job properly. So a couple of months after that, it was discovered that they;ve been paying a game company to the tune of 4K.

 

So I can understand why the tax situation can happen. 

[Tess in the Burbs]

we owed 11K in taxes in 2011 due to a mistake in how much tax to pay when we needed to pull retirement money out.  I learned the following:

 

You can ask for a discount on the interest ONCE.  So get the payment plan going, pay for years, then 2 months before it's paid off you call and ask the interest to be reduced or dropped.  They will do it ONE TIME and one time only.  It's being recorded, so be careful when you ask about this that they don't do it right away.  They will only drop interest that is charged.  So you want to ask the one time at the end....which basically knocks out the last payment or two.  

 

You can get a payment plan.  This is not a fast process.  While I was ready to start paying in April the year we owed, it was July before I got a payment notice and address to mail it.  The number you call to deal with this takes forever, and you will spend hours of your life to get it set up.  And more hours to call back b/c it's not what you expected.  Take notes when you call.  Name of person, id #.  You will also have a reference number to the account that pulls up old notes.  Have this on hand or you will never make progress!!!

 

 

 

It doesn't sound good for the house closing.  If they don't have money set aside for house taxes/maintenance then they probably can't afford it.  But if they need a payment plan this month....won't happen.  The IRS moves very slowly.  

[QueenCat]

Right, even with direct debit on bills, I usually get the monthly receipt. I have an impression that her dh doesn't take care of the financial problem properly.

 

 I have another friend who just found out that they got a 4K bill from an online game company. Apparently their son has been subscribing to a game membership site without him realizing. He said he just did the trial version but didn't care to cancel the plan (or forget) after the trial period finished. The husband was supposed to check on their monthly bank statement, but didn't do the job properly. So a couple of months after that, it was discovered that they;ve been paying a game company to the tune of 4K.

 

So I can understand why the tax situation can happen. 

 

I can't........ huge difference with the gaming scenario as the parents didn't KNOW until they got the bill. Your friends KNEW and if they didn't get a statement, they should have inquired about that. It's not rocket science.

[Miss Mousie]

 

At the end, I think it's a duty of a friend to counsel and help solving the problem.

 

Admirable, I suppose, but only if the friend is actually able to offer competent advice.  You aren't even in the same state and are totally unfamiliar with the details of the situation. 

 

Keep it that way!  Stop digging in deeper.  Just say, "I know it's a tough situation, but I cannot offer advice because I'm not experienced with such things.  I'll keep sending good thoughts your way and hope you find the help you need."

 

Then stay off FB (or whatever the mode of contact is). 

[TechWife]

It sounds like they aren't ready to own a house. If they can't manage to pay their existing tax bill, then they are unprepared. Income tax is a tax on income earned. This means that the money was there to pay it. I assume they are self-employed and haven't estimated and/or paid their taxes properly. If they have been keeping money back from their tax payments to meet the basic necessities of life, then no, they probably can't afford home ownership and the added expenses that go along with it, over and above what they are curren paying in rent. If they haven't been paying their taxes out of misunderstanding or out of personal preference they aren't prepared to be homeowners.

 

I would stay out of it.

[SparklyUnicorn]

No clue regarding the tax situation.  But let's say they do find a friend to lend them the money.  A lot of banks won't give them a mortgage under those circumstances.  Only way around that is for the friend to agree it's a gift.  Now they could arrange to still pay it back, but that's extremely risky for the friend because the friend will literally have to write a letter stating the money is a gift (no person in their right mind would or should do that for that amount of money).

 

I know not paying can rack up some serious debt, but it still sounds ridiculously high.  How does a family with 7 kids manage that?!  They probably should consult a lawyer. 

[Ummto4]

I can't........ huge difference with the gaming scenario as the parents didn't KNOW until they got the bill. Your friends KNEW and if they didn't get a statement, they should have inquired about that. It's not rocket science.

 

I misspoke. The family with the gaming scenario -- the parents didn't get the bill at the end , but realized that they've been paying the membership for months (to the tune of 4K). The husband should've checked their bank statement monthly (apparently that's the husband's job in the family), but he didn't do it carefully and missed the direct debit payments for months. They didn't know that their money was gone. I'm not sure where the receipts went. It could be to the son's email or the husband's. I don't know. But it caused quite a ruckus back then. 

 

My friend's dh (in the tax scenario) might not realize -- if  the payment plan is online - that they've not been paying for months if he's not careful in checking the receipts/bank statement. If it's not online, then it's pure negligence. 

 

But I agree - the responsibility is to the payer. 

Edited April 14, 2016 by Ummto4

[Ummto4]

Admirable, I suppose, but only if the friend is actually able to offer competent advice.  You aren't even in the same state and are totally unfamiliar with the details of the situation. 

 

Keep it that way!  Stop digging in deeper.  Just say, "I know it's a tough situation, but I cannot offer advice because I'm not experienced with such things.  I'll keep sending good thoughts your way and hope you find the help you need."

 

Then stay off FB (or whatever the mode of contact is). 

 

Actually what I am aiming at this point is to open her mind about the house closing. I don't think they can afford the house.  And also to point her to direction for help:

- legal aid society

- pro bono lawyer

- subsidized housing (if she needs to move out -- may be they're eligible for this, if their state has such scheme). 

- possible way to decrease the lien or lift the status  (negotiation, or payment plans). 

 

I'm not giving her legal advice at all. Just point to the general direction and give her things to think about. And yes, basically I wish her good luck , and pray for her to get the best solution to her problems. And no, I don't think I'm going to send her money. 

[Lanny]

I have been wondering, since this thread began, if the people with this problem are guilty of "Tax Evasion", which is a Crime,  rather than just not paying all the state income tax they owed.  I lived in  a state with an income tax (CA) when I was very young and my guess is that if someone underpays their tax, and then begins repaying what they owe, regularly, like a clock, that there would *not* be a lien involved. The lien makes me believe this has been building up for possibly 5 years.  I do not understand the State using a Collection Agency or Debt Collector, but anything is possible. The people should move to a state with a lower COL.  The people should not buy that house. The people should get a free introductory consultation with a Bankruptcy Attorney.  Nobody should loan or give them money.  They will just dig the hole they are in now much deeper if they are able to purchase the house they are living in now.  My memories are vague, but I seem to recall that when I had to fill out a State Income Tax return, that it was quite similar to my Federal Income tax return.  It seems they do not have any problems with the I.R.S.  The I.R.S. and the states share information, so if they reported income to the I.R.S. that they did not report to the state, Bingo... As others have written $17K, even with interest and penalties added,  is a lot of state income tax for a low income family and something does not add up here... 

[Ummto4]

I have been wondering, since this thread began, if the people with this problem are guilty of "Tax Evasion", which is a Crime,  rather than just not paying all the state income tax they owed.  I lived in  a state with an income tax (CA) when I was very young and my guess is that if someone underpays their tax, and then begins repaying what they owe, regularly, like a clock, that there would *not* be a lien involved. The lien makes me believe this has been building up for possibly 5 years.  I do not understand the State using a Collection Agency or Debt Collector, but anything is possible. The people should move to a state with a lower COL.  The people should not buy that house. The people should get a free introductory consultation with a Bankruptcy Attorney.  Nobody should loan or give them money.  They will just dig the hole they are in now much deeper if they are able to purchase the house they are living in now.  My memories are vague, but I seem to recall that when I had to fill out a State Income Tax return, that it was quite similar to my Federal Income tax return.  It seems they do not have any problems with the I.R.S.  The I.R.S. and the states share information, so if they reported income to the I.R.S. that they did not report to the state, Bingo... As others have written $17K, even with interest and penalties added,  is a lot of state income tax for a low income family and something does not add up here... 

 

I don't know exactly what happened. It could start with underreporting the income either out of ignorance or deliberately (as others have mentioned), or they never intend to pay the tax in full ... ever and haven't been doing it for a couple of years. Perhaps because their income is too low to live in that area (I"ve been wondering about that long time before this) and there's no way for them to live and pay the tax in full. 

 

But anyway, she said that they're going to the tax office today. I don't think anybody (friends) offer them anything. We all wish them good luck and hope for the best solution. She said she's preparing herself to come to term with not being able to close the house. I hope they can get a good payment arrangement with the tax office and just end this mess. 

 

Btw, Lanny, I mentioned up in the thread that they came into this trouble only recently because they missed a couple of payments because the change of collector agency. So perhaps, there's only debts back then, but not lien. But it turns into a lien because of the missed payments. 

Edited April 14, 2016 by Ummto4

[need2read]

I also agree about the 17K seeming high for state taxes. We making a decent living and still owed under 5K to our state for 2015.

 

If they indeed are low income and can prove it they can probably have their tax bill reduced, the IRS and most state revenue services will do this. The best thing they can do is to work out a payment arrangement to get it paid off and they definitely should not buy a house or make any other big purchases.

 

 

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