Last week, the Internal Revenue Service (IRS) hit Rudy Giuliani with a tax lien on his Palm Beach, Florida condo due to a reported debt of almost $550,000 for the fiscal year of 2021. As the IRS’s revenue officers have recently ceased making unanticipated taxpayer visits, their primary method of enforcing action has become issuing tax liens. The IRS issues these liens when considerable tax debts arise, typically when the taxpayer’s balance exceeds $10,000. According to the Internal Revenue Manual, liens can occasionally be averted when the balance is under $25,000 and an installment agreement is arranged.
Guiliani now faces the impacts of a Notice of Federal Tax Lien (NFTL). In the past, such liens would damage a taxpayer’s credit score, thereby impeding their ability to secure loans. However, in recent years credit reporting bureaus have excluded tax liens due to concerns over accuracy. NFTLs remain public information, creating potential challenges for those embroiled in their grasp to find or maintain employment in financial sectors or other roles requiring the handling of sensitive information or finances. More pressingly, if the taxpayer happens to be a public figure, the news can report on it, which might inflict reputational damage.
Following the imposition of this tax lien, Giuliani has several options. He could sell the condo, which is reported to be worth between $3 million and $4.5 million. If there is sufficient equity in the condo, its sale could cover part or all of the tax debt. Giuliani could also attempt to negotiate a payment agreement with the IRS, which, according to his representative, is already in place. However, merely setting up an installment plan usually doesn’t eliminate the lien. Giuliani could also request the lien’s withdrawal if it was filed in error or without proper procedure, or if its removal would align with the government’s best interests.
An additional option is filing for bankruptcy, though the process is complex given that income taxes for the three most recent years are non-dischargeable in bankruptcy cases. Additionally, tax returns for the years in question must have been filed a minimum of two years prior, and the tax debt must have been assessed at least 240 days in advance to provide the IRS with a sufficient collection period.
Giuliani has been caught in a series of legal disputes, including a million-dollar lawsuit over unpaid lawyer fees, a defamation judgment, a $10 million lawsuit by a former employee alleging harassment, and a recent lawsuit from Hunter Biden accusing Giuliani of hacking his laptop. Given these significant potential judgments, filing for bankruptcy before further liens are filed might be a sensible strategy, even if it permits the persistence of the tax debts.
In this financial whirlwind, the IRS has emerged as yet another creditor, with its tax lien potentially giving it first dibs on Giuliani’s assets during this tumultuous financial period.