Bloomberg Tax
July 28, 2022, 8:45 AM

From Liens to Online Lists, Avoiding Tax Delinquency Notoriety

Kelly Phillips Erb
Kelly Phillips Erb

The South Carolina Department of Revenue recently published lists of the state’s top 250 individual and top 250 business tax debtors. The lists, part of the state’s Top Delinquent Taxpayers initiative, are published quarterly and can be found on its website.

Collectively, the business and individual delinquent taxpayers on the list owe more than $104 million in taxes. Before the names are published, the SCDOR says it exhausts efforts to collect the debts, including sending letters and making calls or personal contact multiple times.

According to the SCDOR, some tax debts are not made public. Exclusions apply to taxpayers who have filed for bankruptcy, those who have made payment arrangements, and debts currently in the SCDOR’s GEAR or Setoff Debt programs.

Why make the news public? Director Hartley Powell said in a statement posted to the SCDOR website, “When noncompliant taxpayers don’t pay their fair share, the tax burden unfairly shifts to the compliant taxpayers. We are all in this state together, so it is important to hold delinquent taxpayers accountable.”

Delinquent Taxpayer Lists

The Palmetto State isn’t alone. At least a dozen states make the names of delinquent individual or business taxpayers—or both—public. Some local governments, like Fairfax, Va., also make the lists public.

Some states, like Massachusetts, won’t post tax debts unless they exceed a certain amount—the threshold is $25,000 in the Bay State. In Wisconsin, the starting point is $5,000.

But other states, like Wyoming, publish based on time passed, not dollar amounts. Taxpayers that are 150 days or more delinquent in sales and use taxes can see their names appear on a monthly list. That means that taxpayers who owe amounts as small as $6.81 and $37.20—yes, really—have their information made public.

The kind of information published varies by state and local authority. Some lists share the names of taxpayers along with their addresses, while others may include the amounts owed. In California, the list may also include the taxpayer’s occupational and professional licenses.

So, They Deserve It, Right?

That’s a question that tax practitioners and tax policy makers have debated for some time. One of the reasons for publishing these kinds of lists is ostensibly to shame taxpayers into settling up. This is particularly the case for business taxpayers, where reputations for honesty and paying bills timely can affect current client patronage and future growth. In fact, California notes on its website that “Other persons and businesses may use this list to make sure they don’t work with people or businesses who are on the list.”

But that, of course, assumes that taxpayers are aware of the amounts owed and are simply choosing not to pay. As many tax practitioners are well aware, though, that may not be the case.

You only have to peer at some of the lists to see many out-of-state (or out-of-locality) taxpayers. While it could be true that those taxpayers believe that they’re untouchable beyond the border, it may also be that they are not aware that they owe any tax. Filing and payment requirements can be very different between states, so that taxpayers may believe they’re compliant when they’re not.

Out-of-state taxpayers may not have received notice that they owe. That’s true for many taxpayers. Tax delinquency notices may be mailed to old addresses, or mail could have been misdirected or gotten lost. And not all jurisdictions require proof of receipt or multiple mailings: The California Franchise Tax Board is only required to send one letter at least 30 days before placing the taxpayer on the list.

In other cases, the tax bill could be wrong. One of my clients was improperly assessed additional sales and use taxes. His accountant assumed that sending a letter contesting the charges was enough. It wasn’t. The Commonwealth of Pennsylvania pushed ahead, filing liens against the business in the county where the taxpayer was located. We filed an appeal—and won—resulting in the removal of the debt and the lien. But it took several months to resolve. In the meantime, public record improperly reflected that the business was delinquent.

What About Liens?

Fortunately for my client, his business didn’t make it onto a delinquent taxpayer list. It’s true that liens are public documents available in court databases, but they usually require you to have some information, making finding taxpayers difficult if you’re not specifically looking for them. In contrast, delinquent taxpayer lists are available online at the click of a button. Some revenue departments even email the lists as part of a press release. That makes accessing the names of allegedly delinquent taxpayers a breeze—even when you’re not really trying.

Still, the argument made by many state and local tax authorities is that the lists are just another public record, like liens. But while making the delinquent list can be simple—like owing a certain amount—the process for filing a lien is often more complicated.

The purpose of a tax lien is to protect the government’s interest in your property, including your real estate and personal property. In most cases, a lien follows a demand for payment and continues until the payment is made or a specific period of time has passed. State tax liens typically attach to property owned by the taxpayer or business in the state. State tax liens can be filed for many kinds of state taxes, including income taxes, sales & use taxes, employer withholding taxes, real property taxes, and excise taxes.

While there’s no delinquent taxpayer list on the IRS website, the agency does file tax liens. For federal purposes, the IRS must assess a tax liability and send a bill. If you don’t pay in full, the IRS can file a Notice of Federal Tax Lien, which puts creditors on notice that the government has a legal right to your property. Practically speaking, the lien lets creditors know that they may not be first in line if you don’t pay up on other debts—this may affect your ability to get credit. Additionally, if and when you sell any assets, you may be forced to turn over the proceeds to the IRS to satisfy your debt.

If you pay your tax liability in full, the IRS will release the lien. The IRS may also work with you to remove the lien under certain circumstances, including efforts to demonstrate compliance while you’re on a payment plan or to sell property (and turn over all or some of the proceeds to the IRS). Importantly, a federal tax lien may continue even after you’ve filed for bankruptcy.

Avoiding Notoriety

If you owe tax, it’s crucial to find out what your options might be. Payment plans are typically available, and if you cannot pay in full, the tax authorities can work with you. You may qualify for an exception to publication or collection, but you won’t know if you don’t ask.

Of course, the best way to stay off delinquent taxpayers lists—and avoid a lien—is to remain compliant. That can be more complicated than you think. If you live in more than one state or own a business, it’s easy to miss something. The best strategy is to work with a tax professional.

This is a regular column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.

To contact the reporter on this story: Kelly Phillips Erb in Washington at