About Tax Liens
A tax lien is a public notice indicating that the IRS has a legal claim on your assets due to unpaid federal taxes. This notice informs creditors that the government has a legal interest in your property.
Often confused with a tax levy, a tax lien functions differently in collection procedures. Unlike a levy, which involves the physical seizure of assets, a lien does not. If the IRS places a lien on your property, such as your home or vehicle, you retain possession and usage rights but lose legal ownership, limiting your ability to sell or use these assets as collateral for loans.
What are the Implications of a Tax Lien on Me?
When a Notice of Federal Tax Lien is issued, it automatically places a burden on your assets, limiting your financial flexibility with those possessions. These assets can include your home, vehicles, savings accounts, and any future acquisitions such as retirement funds.
Additionally, a tax lien publicly acknowledges your tax debt. Once the IRS files a Notice of Federal Tax Lien, it becomes part of the public record. This notation alerts creditors to your outstanding tax obligations and the government's claim to your assets.
Moreover, a tax lien can impact your ability to secure credit. It discourages potential lenders and buyers, making it difficult to obtain loans or explore refinancing options.
For business owners, the lien extends to both tangible and intangible assets of the business, exposing it to potential seizure, similar to personal assets.
It's important to note that even bankruptcy does not relieve you of your tax lien obligations. If you file for bankruptcy, your federal tax lien remains in effect.
How Can I Get Rid Of A Lien Against Me?
Immediate action is crucial when faced with tax liens. Although paying your taxes in full is the most straightforward way to lift a tax lien, it may not always be feasible within the given timeframe, especially for larger amounts owed. If you disagree with the amount owed, you have the right to appeal the process.
Here are some alternative options for resolving tax liens and settling your tax debt:
Discharge of Property: This removes the lien from a specific property.
Subordination: This gives other creditors priority over the IRS, which can be beneficial when seeking loans or mortgages. Alternatively, you can request the withdrawal of the tax lien.
Even after the tax lien is removed, you remain liable for the entire federal tax debt unless further action is taken.
Another option for addressing a federal lien on your assets is to apply for an Installment Agreement or an Offer in Compromise. These solutions can provide a way to resolve your federal taxes without causing financial strain or negatively affecting your credit.
While the IRS cannot seize assets solely due to a tax lien, they may resort to a levy if no action is taken to mitigate the consequences of the tax lien.
Ready to resolve your tax issue?
In just a few minutes you’ll be matched with a real professional with a proven track record.