Key TakeawaysShort on time? Check out the key takeaways on tax lien help here.
A lien is a legal right to possess your assets due to unpaid debt; the IRS can place a lien on your property if you have unpaid back taxes.
Tax liens can lead to the legal seizure (or levy) of assets like your home, property, savings, or investment accounts.
The best way to avoid a lien or levy is to pay your bills on time. If that isnâ€™t possible, you have the option to negotiate an installment agreement, offer in compromise, property discharge, or other means of paying down your balance.Â
Tax liens can harm your personal finances by both taking your assets and damaging your personal credit, leading to higher interest rates and difficulty borrowing.
Community tax representatives are happy to work with you to resolve any IRS liens placed on your property.Â
- What is a tax lien?
- How do I get help with a tax lien?
- When will a lien withdrawal be issued?
- Qualifying for a lien subordination or withdrawal
- Avoiding a tax lien
- Removing a tax lien
What is a Tax Lien?A tax lien is a form of a passive collection action that the IRS can impose upon a taxpayer.Â It is a public document that alerts other creditors that back taxes are owed to the IRS, and that the government has a legal right to possess the property you own. This is similar to the action all creditors can take with the purpose of securing interest in the money that is owed.Â When a federal tax lien is filed by the IRS, it attaches itself to your assets. Your assets include your home, your car, other property, bank accounts, and investment accounts. A tax lien is essentially a legal claim made by a government entity against a truant or noncompliant taxpayerâ€™s personal assets.Â The bill explains how much you owe.Â This means that a tax lien almost never comes out of thin air.Â Tax liens tend to be a last resort, and are only enforced after the government agency has repeatedly notified the taxpayer of an outstanding tax balance that has been ignored or is otherwise unpaid. Tax liens are more common than you thinkâ€”in fact, Americans collectively owed $131 billion in back taxes for the 2018 tax year. A percentage of those taxpayers may have faced a lien, if they did not pay in time.Â The purpose of the lien is to ensure that the IRS has the ability to receive owed money in the event that you attempt to sell any property.Â When a tax lien is enforced, profits from any property you sell will first be applied to your tax debt, and will go straight to the IRS.Â You are then entitled to whatever remains, given that you have paid off your entire debt with what you sell.Â This is a very common problem for our clients when they own a home and want to sell that home, or they want to procure a home equity loan. If you have a tax lien that shows up on your credit report, it could also prevent you from getting a mortgage if you are attempting to purchase a home. While there are several ways to remove the lien, the ideal situation is to never receive one to begin with.Â When a tax lien is filed by the IRS, creditors will be alerted that the government has links to your property. For taxpayers, this can become a hindrance to the future of accessing a mortgage for a home or loans for other expenses. If a taxpayer communicates with the IRS to negotiate payment and follows through with that payment, then the lien will likely not be enforced.
What are the Implications of a Tax Lien?A federal tax lien is one collection method used by the IRS. This tactic puts a legal hold on a taxpayerâ€™s assets to keep them in place for the government to seize them if the balance is not settled in a timely fashion. Federal tax liens are issued through a notice sent to the individual following the initial notices of missed payments or filing deadlines. This action causes unwanted stress and damages credit ratings and scores for years to come. For this reason, hiring a tax professional to handle a federal tax lien is often the best course for a tax debtor to take. IRS tax liens can lead to leviesâ€”or forced seizure of your propertyâ€”used by the IRS to collect money and personal assets. This action does not require a warrant, as the IRS is a branch of the government. Avoiding federal tax liens and subsequent tax collection activities is manageable with the right help. It is very important to find a trustworthy tax debt expert to aid in resolving any legal tax problems. If you do have an IRS lien in effect, these are some of the harmful effects you may be able to expect:
- The first harmful effect a tax lien has is on your credit score. A tax lien usually subtracts about 100 points from your credit score, and a lower credit score means paying higher interest rates on loans and can affect your ability to get a job or find housing.Â
- The second harmful effect is in buying and propertyâ€”especially real estate. It is often very difficult to obtain a loan if you have IRS tax liens because, once the property is purchased, it becomes subject to the lien, and this makes lenders nervous.Â
- Third,Â is also difficult to sell property subject to the lien because the lien travels with the property, and the lien must be paid in full before the buyer can have a clear title. If you are thinking of buying or selling property in the near future itâ€™s wise to avoid liens at all costs.
How Do I Get Help With a Tax Lien?There are many paths to take when addressing an IRS lien. The tax professionals at Community Tax LLC are experts in working with clients and the IRS to find the optimal solution for you.
Pay your tax billThe best way to remove an IRS tax lien is to fulfill your obligation to the IRS and fully pay off all of your tax debt upfront, including interest.Â Doing so will ensure that your lien is removed within 30 days of fulfilling your obligation.Â We understand that paying in full upfront is not always a practical or realistic solution for our clients.Â At Community Tax, we know that every clientâ€™s financial situation is unique.Â Â Our first priority is to work with our clients to figure out why they need a federal tax lien removed and why it needs to be addressed. Our professionals have experience in analyzing an individualâ€™s finances, assets, and tax debt to find the best solution. Once we have an understanding of a clientâ€™s specific situation, we determine whether a lien removal based on discharge of property is possible, whether we can apply for a lien subordination or withdrawal, whether our client needs to establish a direct debit installment agreement, or whether a client qualifies for an offer in compromise. Below is a description of the many ways an IRS tax lien may be addressed.
Discharge of PropertyA discharge of property entails that you liquidate, or sell off, all necessary assets in order to pay tax debt.Â This may be included in a Chapter 7 bankruptcy. By liquidating assets, you may complete or come close to resolving your tax debt. It is important to note that for bankruptcy to clear debt, there are some types of property that may qualify to be discharged, while some property is protected from liquidation. It is essential that you contact a professional when considering a Chapter 7 discharge. This is because the discharge is often subject to many exceptions, which could jeopardize your ability to have your discharge approved.Â At Community Tax, our tax lawyers, enrolled agents, and CPAs have extensive knowledge and first-hand experience with the subject of tax law and financial regulations. Itâ€™s important to know that you may be denied for several reasons. These include:Â
- Failure to produce adequate financial records
- Insufficient explanation of loss of properties
- Committing a bankruptcy crime
- Committing fraud by concealing or destroying assets
- Not taking the appropriate instructional course regarding financial management