Missouri Tax Liens: What to Expect, How to Remove

The Missouri Department of Revenue may issue a tax lien if you don't pay your MO state taxes. Tax liens attach to all your current and future property, and they protect the state's interest in your tax debt. 

A tax lien is generally the first step in the involuntary collection process, and it restricts your ability to freely sell or borrow against your assets. If you sell property while a lien is attached, the DOR is entitled to the funds from the sale up to the amount of your tax debt after taking into account any creditors that had pre-existing liens attached to the property. 

To protect your finances, start your search for a local tax professional on TaxCure today. A tax pro experienced with the MO DOR can talk with you about your options and help you find the most effective solution for your state tax debt.

What Is a Missouri Tax Lien?

A tax lien is a legal claim to your assets from the MO DOR. If you get behind on your MO state taxes, the DOR can issue a lien that attaches to all your real and personal property including homes, vehicles, etc. 

Tax liens are filed in the county recorder of deeds office. Additionally, if you don't pay your taxes, the DOR does not have to take you to court to get a judgment against you. Rather, an Administrative Judgment (AJ) filed with the Circuit Clerk gives the tax lien the effect of a default judgment.

How Do Tax Liens Affect You?

Tax liens affect your ability to buy, sell, transfer, or refinance your assets. To give you an example, imagine that the DOR issues a tax lien for $50,000 against you, and it attaches to all of your assets. Here's how that affects you in a few different scenarios.

Selling property

You decide to sell your home for $300,000. You owe the mortgage company $280,000, and there's also a $50,000 lien from the MO DOR. The title company will send the mortgage company $280,000 because their lien was established first. Then, the title company will send the MO DOR the remaining $20,000. You receive no money from the sale of your home, and a state tax lien for $30,000 continues to exist.

Refinancing a loan against your assets

Now, imagine you have a $50,000 tax lien, but you have $100,000 equity in your home so you ask your mortgage company to refinance so that you can pay off your tax debt. Your mortgage company will only agree to lend you more money if the MO DOR agrees to discharge its lien from your home or let the mortgage company's new lien supersede the DOR's lien. 

Although you may be able to get the loan, you will have to deal with a lot of paperwork first, and if the DOR refuses, you may not be able to refinance. 

Transferring assets to heirs after death

Unfortunately, tax liens can even exist after death. Imagine you die and your home passes to your children. The home is worth $250,000 and there is no mortgage. If your heirs decide to sell the home, the lien will be paid out of the proceeds of the sale.

Receiving new assets

Imagine there is a $50,000 state tax lien against you, and you inherit a house or a friend gives you an old RV. The state tax lien attaches to those assets as soon as they are titled in your name. If you sell those assets, the state will be entitled to the proceeds as noted above, and if the state decides to exercise the Administrative Judgment, the DOR may be able to seize and auction off those assets to pay your taxes. 

How Do Administrative Judgements Affect You?

An Administrative Judgment gives the tax lien the effect of a default judgment. This allows the DOR to initiate a wage garnishment or other actions related to the seizure of your assets.

In contrast, if you owe money to another unsecured creditor, they must go to court to get a judgment against you. For example, if you don't pay your credit card and the creditor wants to garnish your wages, they must take you to court and get a judgment against you before that can happen.

How to Get State Tax Liens Released

In Missouri, you can get tax liens released as follows:

• Pay in full - The DOR will issue a satisfaction of lien 45 to 60 days after you pay the debt in full.
• Show that you don't owe the debt - If you do not owe the tax liability, the DOR must remove the lien.

You may also be able to convince the DOR to discharge the lien from a certain asset if doing so will help you pay your taxes. The DOR must also withdraw liens that were filed in error.

What If the Lien Is Causing Financial Hardship?

Unfortunately, the DOR does not withdraw liens due to financial hardship. However, if the DOR is garnishing your wages or seizing your bank account, you can request a hardship modification. To qualify, you must show that the garnishment is preventing you from covering necessary living expenses. Apply with Form 5668 (Garnishment Hardship Application).

Tax Lien Notices

Before issuing the tax lien, the DOR will typically send you several notices. If you don't pay taxes due to filing and not paying, failing an audit, or having the DOR adjust your return, you will receive a balance-due notice. If you don't pay that, you will receive an assessment notice. You have 60 days to respond before the assessment becomes final. 

If you don't respond, the DOR will send a demand notice with a 10-day deadline. Typically, after that you receive an intent to offset notice alerting you that the DOR will take your tax refund, and finally, you will get a notice about the tax lien. 

Note that this timeline is not set in stone. Once the taxes are assessed but not paid, the state can move forward with the lien at any time. If you have unpaid state and unpaid IRS taxes, you will likely see the MO tax lien before the IRS tax lien. 

What to Expect When the DOR Files a Tax Lien

While the tax lien is in place, interest will continue to accrue on your account. If you file any returns showing a refund to the IRS or the state, the MO DOR will seize the refund and apply it to your tax debt. 

What if the Lien Relates to a Tax Debt Due to My Spouse?

The DOR may be willing to remove part of a tax lien if the debt is solely related to your spouse. However, the Department decides this on a case-by-case basis. To apply for separation of liability, send your request to the following:

Missouri Department of Revenue
PO Box 385
Jefferson City, MO 65105

Or, you can email the department at [email protected].

How to Avoid a Tax Lien

To avoid a tax lien, file and pay your taxes on time. If you're worried about the DOR adjusting your return, work with a tax professional to safeguard accuracy when you complete your tax returns. Accuracy is especially important when dealing with complicated business tax returns including Missouri sales tax and withholding tax. 

If you cannot afford to pay your tax liability in full, set up an installment agreement as soon as you can. If you are proactive and can pay off the debt in a reasonable time frame, the DOR may not file a lien. If you're already dealing with a tax lien and you cannot afford to pay in full, you may want to look into an MO offer in compromise which lets you settle for less than owed.

Get Help With Missouri Tax Liens

A tax professional can help you set up payments, apply for an offer in compromise, or make other arrangements on your state tax debt. They can also help you apply for a lien release, withdrawal, or discharge. When dealing with state tax problems, you should always look for a tax pro based in the state who has experience dealing with the MO DOR. 

Every state's tax laws and resolution processes are different, and unfortunately, the big national firms often lack state-specific experience. In contrast, when you use TaxCure to search for a pro, you can narrow down the results to local pros, and you can further narrow down to pros who have experience with Missouri tax liens.