Many businesses depend on others for financing, such as banks and more specifically, factoring companies. Many of these factoring companies will factor receivables up until there is an IRS tax lien of record. When a tax lien is filed, usually for outstanding payroll taxes, the factoring company can no longer continue to offer funding to a business. Therefore, we must step in immediately to negotiate between our client, the factoring company and the IRS.
Working with the IRS as many of you know can be a grueling process. I highly suggest you contact me at Larson Financial for assistance in dealing with the IRS at any level, let alone dealing with a factoring company and a tax lien. Once we find out a company works with a factoring company, we must endeavor to secure a subordination of Federal Tax Lien. Once secured, the factoring company will be in first place and thus there is little or no risk for them to fund. However, prior to, a factoring company can delay funding for a short to a long period of time, which can delay a business from operating. The subordination process can take up to 30 days, therefore, it is imperative to keep the IRS from filing a tax lien and if they do, secure a subordination immediately. There is a process of course, as with any resolution at the IRS level, but they will work with you and process your claim usually within 30 days. Further, this type of process can speed up resolution of the case, as our clients realize the risk and want to get all resolved as soon as possible.
As always, it is imperative that a business remain current and compliant throughout the process as further accruals can delay any resolution from taking place.
We recently were able to work between the IRS, our client, and the factoring company to enable the factor to continue to fund our client with the lien in place, while our subordination application was pending. Once agreed to, it is usually only agreed to for a 90 day term, therefore we must revisit if there is not a resolution in place such as an installment agreement. We were able to work with the IRS on a weekly basis until our application was approved. Now that it has been approved, we will be working with the IRS to secure an installment agreement to satisfy the debt over time.
I hope this short memo helps explain the importance of dealing with the IRS and more importantly factoring companies.