business people have a discussion about federal tax liens
ComplianceFinanceMarch 08, 2017

Developing a search strategy for federal tax liens

Currency is king

You already have a ticking clock over your head once a federal tax lien is filed on one of your clients. Don’t speed up the clock by relying on data that lags behind the times.

Information culled from online databases is inexpensive, but you get what you pay for. It’s not current. In fact, it often lags months behind real-time data. By the time you find evidence of a lien filing, you have likely already issued credit that will be second in priority to the IRS.

Instead, get your data straight from the source. Hire a service provider to do manual searches at the state and county level, which means sending someone physically to the clerk’s office. This is the surest and most effective method of detecting federal tax and other liens quickly and effectively. With this kind of data currency, if there’s a tax lien, you’ll find it in time to act.

State or county jurisdiction search?

There are a number of jurisdictions that require federal tax liens to be filed only at the county — not state — level. So, in these jurisdictions, if the database or service provider you are using is relying on state data, then you will never find that lien at all. For this reason, county data is an imperative.

How often to search?

The next question is how frequently you should be searching. The answer really depends on your comfort with risk, but decisions can be made on a deal-by-deal basis, based on the value of the deal or the risk profile of the borrower. If you want the most comprehensive protection, you should perform state and county-level manual searches every 30 days. If you decide a particular deal is lower risk, you may want to search every 60 days, or quarterly.

Search recommendations

We recommend that you conduct what is known as “recurring searches” at the state and county level. This recurring due diligence will be essential to protecting your interests throughout the lives of your loans; you’ll be alerted with immediacy to events such as federal tax liens that can threaten your portfolio, so you can take appropriate action to protect yourself.

You decide how frequently you want to search, on a deal-by-deal basis. A service provider can help you perform the searches, and some service providers, such as Lien Solutions, manage the process and the results.

For more information on the benefits of conducting recurring due diligence with Lien Solutions with our innovative new technology and trusted service teams, click here.

Amanda Rasizzi of Lien Solutions
Director of Marketing
Amanda Rasizzi is Director of Marketing for Wolters Kluwer Lien Solutions. She oversees all marketing activities for the company. Rasizzi and her team communicate the company’s array of lien management, risk management, and life-of-loan solutions to prospects and clients, support the selling efforts of the Lien Solutions organization, and position the organization as an industry market leader.