How to Get a Mississippi Tax Lien Released for Your Business
When a taxpayer fails to pay their taxes, the Mississippi Department of Revenue has a variety of tools it can use to force payment and collect what they are owed. One of those tools is a tax lien—a legal claim to a taxpayer’s property. Liens can be removed with full payment or other payment arrangements, but it is important to take action to avoid having your assets seized and sold to cover your business tax debt.
Learn more about business tax liens and how the team at Damiens Law can help you protect your assets and get back on track with your taxes.
Key Takeaways
- The DOR may issue tax liens if your business has unpaid state tax debt.
- Liens do not appear on your credit report but are publicly accessible.
- A lien can prevent you from selling or transferring your property.
- Liens are the first step to seizing your property for tax enforcement.
The Pathway to a Business Tax Lien
Under state tax law, the Department of Revenue has broad authority to use liens to ensure payment of the money they are owed. The DOR may file a lien for any type of unpaid tax, including sales and use tax, withholding tax, income tax, and franchise tax.
When a lien is placed, it generally takes priority over other creditors’ claims to your property, although there are exceptions. A lien gives the government the ability to seize your assets to cover your tax liability. If you don’t take steps to address your tax debt after the Department of Revenue has placed a lien on your business assets, they may seize and sell property, freeze your bank accounts and seize the money in them, and block asset transfers that would leave them unable to collect what you owe.
When the Mississippi DOR Files a Business Tax Lien
While business tax liens are always the result of unpaid Mississippi taxes, there are many ways that you can find yourself in debt to the Department of Revenue. A business may face a lien if they have consistently failed to file returns or pay sales, use, and withholding tax. If the Department of Revenue conducted an audit, found discrepancies, and assessed additional tax, they may issue a lien if the business does not take steps to pay off that tax debt.
Even if a business attempts to handle its tax debt properly, failing to follow through may result in liens. If a business falls behind on a payment plan and doesn’t get caught up within the grace period, the state may place a lien to protect its financial interests.
Before issuing a lien, the Department of Revenue does attempt to collect voluntary payment. However, if a business fails to respond to notices or otherwise address the tax debt, the Department of Revenue may have no other option but to protect its best interest.
How a DOR State Tax Lien Works
A lien protects the government’s claim to your property. It alerts other creditors and lienholders that the government has a stake in your property. If you sell the property, the lien gives the DOR the right to the proceeds, up to the amount of the tax debt, but if there’s already a lien on that piece of property, the DOR may be behind other creditors.
Here’s a quick example. Your business owns a delivery van. You owe $15,000 on the van loan. The DOR issues a business tax lien for $11,000. You sell the van for $20,000. The lender is first in line with its lien, so it gets $15,000. The DOR gets the remaining $5000. You get nothing from this sale, and there’s a remaining $6000 tax lien from the DOR.
Ideally, the DOR would prefer that you pay what you owe to get the lien released. However, if you do not take steps to pay what you owe, the lien gives the DOR the right to move forward with a levy. If that happens, they can freeze your bank accounts, seize your assets, and sell your assets to recoup what you owe.
Where Business Tax Liens Are Filed and Recorded
The Department of Revenue enrolls tax liens on the State Tax Lien Registry. The State Tax Lien Registry is publicly accessible, allowing users to search for liens via lien ID, individuals’ names, or business names.
It’s important to note that tax liens do not show up on credit reports anymore. Due to changes in credit reporting rules, neither state nor federal tax liens are on credit reports anymore. This means that they do not affect your credit score.
Can the DOR Issue a Business Tax Lien on Your Personal Assets?
In some cases, yes, the DOR can hold you personally liable for business taxes such as sales tax, and if that happens, they may issue a tax lien against your personal assets. Similarly, the IRS can also hold individuals liable for some IRS business taxes.
Consequences of a Business Tax Lien
While tax liens may not be included on credit reports anymore, they can still significantly hinder your business operations. Tax liens are public record, so any individual or company interested in doing business with you can look up your business on the State Tax Lien Registry and find out if you have liens against you. This may indicate financial instability, driving away potential investors or business partners.
If you want to sell or transfer property, a lien will complicate the process. You will be required to give the sale proceeds up to the amount of the lien value to the DOR, and if there’s any remaining lien value, you’ll have to get the DOR to discharge the lien from that piece of property so that you can complete the sale. Even if you just give something away, the lien will stay attached when the property transfers to its new owner.
A lien could also complicate business financing. While lenders do not see your tax liens on your credit report, they can easily run your business name through the State Tax Lien Registry and see that you have a lien against your assets. This is likely to make lenders shy away from the risk. Additionally, you will not be able to use your assets as collateral unless you get the state to subordinate its lien to the lender’s lien.
Because liens are public record, you may also find that your company’s reputation suffers as a result of the tax lien. In addition to lenders choosing not to work with you, other businesses may not want to be associated with a company facing tax problems.
In some cases, business tax issues can become personal tax problems for business owners, shareholders, and other responsible parties. This is often the case when a business has unpaid sales, use, and/or payroll taxes. Since these are trust fund taxes, the government may hold the party responsible for collecting and paying them personally liable for non-payment. This may result in liens against the individual’s personal property, not just the business’s property.
Finally, if you fail to address your tax lien in a timely manner, you could find your assets seized and bank accounts frozen. This can immediately leave you unable to continue business operations.
How to Get a Business Tax Lien Released
There are several ways you can address a business tax lien and prevent further issues.
| Method | How It Works | When It Applies |
|---|---|---|
| Pay in full | Pay the full balance due—the DOR cancels the lien | When you are able to pay in full and do not want to dispute the amount owed |
| Installment agreement | You agree to monthly payments until the balance is paid off; may need to make a down payment | Good for those who cannot afford to pay in full but can afford monthly payments; lien may be released as part of the installment agreement |
| Bond or surety | Ensures compliance with tax laws in lieu of a lien | Used very rarely; requires special approval |
| Offer or settlement | You pay an amount approved by the DOR to settle your tax debt for less than what you owe | Suitable for those who cannot pay in full but can afford to pay off part of their tax debt, generally not allowed for in-operation businesses |
| Lien challenge | You challenge the lien because it was filed in error or without proper notice | In rare circumstances; generally requires legal assistance and extensive documentation |
When You Should Talk to a Tax Attorney
A business tax lien can be very dangerous for your company. A lien puts the DOR one step closer to enforced collection, and you risk losing your business assets, bank accounts, and reputation within the community.
If the DOR has already placed a lien on your assets (or is threatening to), it is time to talk to a tax attorney. Your tax attorney can handle communication with the Department of Revenue on your behalf, help you get compliant with all DOR requirements, negotiate potential payment plans or settlements, and challenge a lien if it was filed in error.
We understand how stressful a business tax lien can be, and we are here to help you plan your next steps. The team at Damiens Law can help you negotiate a payment arrangement or fight for the removal of your lien. Call us at 601-873-6510 or send us a message online to schedule your discovery call.
Sources:
https://www.dor.ms.gov/news/state-tax-lien-registry
https://answerconnect.cch.com/document/jms0109013e2c83aba3f7/state/explanations/mississippi/tax-liens
https://law.justia.com/codes/mississippi/title-85/chapter-11/section-85-11-9/
