IRS Tax Lien
During the collection process, even if a taxpayer works out a payment solution with the IRS, the IRS may have to file a Notice of Federal Tax Lien to secure the government’s interest. The lien is required by law to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. Once a lien is filed, it may appear on a taxpayer’s credit report and it may severely harm a taxpayer’s credit rating. Therefore, it is important that a taxpayer work to resolve a tax liability as quickly as possible, before lien filing becomes necessary.
What is a tax lien?
A tax lien is the first major step that the IRS takes in order to collect back taxes from an individual. A tax lien is a major mark against your tax record and your credit report, and acts as an insurance policy to ensure the tax liability is not overlooked. The filing of a Lien Notice can make it difficult to obtain credit. It can also cause great difficulty for the taxpayer until the tax debt is paid and the lien is released. Federal tax liens are considered a worst-case scenario, but there are precautionary measures you can take to stave off a lien.
When is a lien filed?
If a taxpayer has unpaid delinquent taxes and has not made an effort to set-up a payment plan or contact the IRS to resolve the issue, then the IRS will send a series of tax liability assessment letters, which includes unpaid taxes, penalty and interest charges. One of the last letters that the taxpayer receives before a lien is filed is an intent to levy. This is basically a final notice, which states that the IRS has tried unsuccessfully to collect in standard ways. The next step is a tax lien, which is not common. (Note: Recently the IRS raised the debt amount for tax liens to a minimum of 10,000.)
If a lien notice is caught before it actually becomes a lien, a taxpayer can possibly avoid the headache and long term negative effect of the lien, and even qualify for a penalty abatement, which can reduce the total amount owed by as much as 25%-50%.
What are the effects of a tax lien?
A tax lien can be crippling for a period of up to 10 years, as per the statute of limitations. This can make it difficult or impossible to make any major purchases, such as property, cars or even household items such as furniture and appliances.
If nothing is done after a tax lien has been filed, the IRS can eventually seize your assets.
What can I do if a tax lien has been filed?
The office of Strategic Tax Lawyers LLP can help. For fifteen years, our experienced IRS tax attorneys have been helping individuals and business owners find solutions to every type of tax issue imaginable. Our team of IRS tax lawyers is led by former IRS attorney Mouris Behboud, who worked as a government attorney for over 8 years. Now he’s passing this valuable insight onto the private sector and onto you. If you are in danger of having a tax lien placed against you, contact our offices today to find out what your options are.
(800) NOW-IRS-LEVY or (800) 669-4775.
Are you suffering because a tax lien has been filed against you? Check out the IRS Tax Lien library page to stay informed on what your options are. These IRS sections on federal tax lien might offer a lot of guidance. Do a local search on your county and state for applicable laws on tax liens at Google.