A federal tax lien is the IRS’s legal claim against the taxpayer’s property when they neglect or fail to pay their tax liability. The IRS uses liens to get people to pay the tax owed. It’s one of the many tools in their arsenal, and for many, it can be one of the worst penalties the IRS can inflict. If the IRS places a lien on your property, it can show up on your credit report and hampers your credit score. The worst part is you may not even be aware of the lien until you apply for a credit card, car loan, home loan, or to refinance. Continuing on the subject, in this blog post, we answer five commonly asked questions about tax lien assistance. Read on.
1. How do you find out when an IRS tax lien is placed?
Before the IRS places a tax lien, they assess the taxpayers with an unpaid liability and demand payment. If the taxpayer does not make any payment within 10 days of the demand, the IRS sends out a notice of federal tax lien. The IRS also sends a Notice of Federal Tax Lien in the mail after the tax lien has been filed or may sometimes try to contact by phone.
2. What assets are subject to a tax lien?
A tax lien covers all the property of a taxpayer along with any future assets they may acquire. The rule keeps it quite broad and open to interpretation and can pretty much cover anything, both tangible and intangible assets.
3. Can a tax lien be removed?
A tax lien can be removed but the IRS expects you to get back into compliance with your taxes. You can also release a tax lien by settling through an offer in compromise, paying in full, allowing the statute of limitations to expire on the tax debt, or offering a bond to IRS that guarantees payment of the tax debt. If you paid your tax debts, make sure to ask for your tax lien withdrawal instead of paid or released on your credit by contacting the IRS.
4. How can I avoid a tax lien?
You can avoid tax lien by staying in full compliance with the tax law. If you are unable to pay the taxes, contact IRS and make an agreement with them to pay your taxes through one of the various settlement mechanisms instead of avoiding IRS notices.
5. How is a ‘tax lien’ different from ‘tax levy’?
A tax lien is the government’s “invisible” claim on the taxpayer’s property but a tax levy is the actual seizure of their assets. With a tax levy, the IRS can take money from garnish wages, bank accounts, and even seize the physical property owned by the taxpayer.
The Bottom Line
IRS tax liens can make your life difficult only if you ignore it and do not take immediate remedial actions. A tax Lien may even make it impossible for you to sell your property as the buyer will be reluctant to buy, since the lien may become their liability. If a lien has been placed on your property or you have been served a notice for Federal tax lien, speak with the IRS tax lawyers at The Law Offices of Nick Nemeth. For a confidential, no obligation consultation, simply call (972) 627-4580.