The Internal Revenue Service (IRS) may place a “federal tax lien” on your property if you have unpaid federal taxes. This lien is a legal claim against your property that gives the IRS a priority interest in your assets.
A Notice of Federal Tax Lien is filed in the county recorder’s office where a taxpayer lives. The two main reasons the IRS uses this collection enforcement tool are as follows:
- A Notice of Federal Tax Lien protects the government’s interest by publicly notifying creditors that the IRS has priority in collecting its debt.
- To encourage taxpayers to come to the table and resolve his/her tax liability. Once a taxpayer has a Federal Tax Lien filing, their credit score may be affected by 50-100 points.
This negative impact on credit increases the cost of borrowing and can prevent the ability to borrow/enter into contracts like leases, etc.
Do not ignore a Notice of Federal Tax Lien; it is a serious matter, especially if a local Revenue Officer signs it. Once a Federal Tax Lien is filed, a taxpayer is given 30 days to file a Collection Due Process Hearing Request to Appeal the lien filing. These Appeal rights can be very important to a case’s resolution/final outcome.
If you have received certified mail from the IRS that contained a Notice of Federal Tax Lien, Call us immediately to Preserve Your Rights and Protect You From The IRS!
What Are Federal Tax Liens?
A federal tax lien is the government’s legal claim against your property when you don’t pay your taxes. The lien secures the government’s interest in all your property, including real estate, personal property, and financial assets. A tax lien may also attach to any after-acquired property or rights to property.
The Internal Revenue Service will issue a federal tax lien, which is essentially a demand for payment due to your failure to pay taxes. The IRS will file a federal lien on your personal assets to collect the unpaid taxes if you do not pay your taxes.
What does a tax lien signify?
If you owe back taxes and the IRS issues a federal tax lien against you, what follows is what might happen.
Your creditworthiness could drop significantly
Although tax liens may no longer appear on credit reports, the IRS can still issue a public notice of the tax lien, informing creditors that the federal government has a claim to your property. That could jeopardize your chances of obtaining financing in the future.
It might jeopardize the closing of a house sale or refinancing
If you try to sell your home or refinance your mortgage, the tax lien will have to be paid off first before the transaction can be completed.
Wasting time can end up costing you a lot
If you want the IRS to release the tax lien before you pay your debt in full, you will have to take specific steps and pay a fee. The process can be difficult and time-consuming, and there’s no guarantee the IRS will agree to remove the lien.
You may be subject to a tax levy
If you don’t pay your taxes or reach an agreement with the IRS on a payment plan, the next step the IRS might take is to levy or seize your assets. The IRS could take money from your paycheck, freeze your bank account, or seize and sell your property.
How Do Federal Tax Liens Work?
When the IRS determines that a taxpayer owes money, they send the person a bill detailing how much is owed. This notice is called “notice and demand for payment.” If the debtor does not pay their obligation on time – whether due to negligence or choice – the IRS can legally place a lien against personal assets.
A lien covers a taxpayer’s assets, including equities, real estate properties, and automobiles. The lien can also be used to seize any property the individual purchases when it is in force. The lien covers a business’s accounts receivable, rights to business property, and commercial property. If a taxpayer files for bankruptcy, the lien, and tax debt often continue even after bankruptcy. This is notable because bankruptcy usually wipes out a person’s debt.
Tax liens are distinct from tax levies in that they simply indicate the government’s right to seize property rather than the actual seizure of it. The IRS will frequently “perfect” a tax lien by notifying other states and creditors that it is first in line to receive payment for the back taxes. A federal tax lien tends to reduce an individual’s credit score significantly. In many cases, individuals with a tax lien must pay their debts in full before regaining access to any financial assistance.
How to Prevent From Getting a Tax Lien?
The best way to prevent getting a tax lien is to avoid falling behind on your taxes in the first place. That means filing and paying your taxes on time, every time.
If you find yourself in a situation where you can’t pay your taxes in full, don’t ignore the problem. The sooner you contact the IRS, the better your chances of negotiating a payment plan that works for you and the IRS.
If you can’t pay your taxes immediately, the IRS may be willing to work with you. They offer various payment options, such as an installment plan, to help you catch up on your taxes without incurring a tax lien.
Keep in mind that IRS would never file a tax lien without sending a bill first. So, if you receive a notice from the IRS that you owe taxes and you don’t
Set up a guaranteed or streamlined installment agreement with the IRS, and it will not file a federal tax lien. The taxpayer is responsible for contacting the IRS to establish these arrangements. The IRS won’t force taxpayers to utilize these alternatives to avoid lien filing.
The lien process is complicated, and the rules vary depending on the type of tax and your circumstances. So, if you’re facing a tax lien, it’s best to seek the help of a tax professional who can help you navigate the process and negotiate with the IRS on your behalf.
How Can You Get Rid of a Federal Tax Lien?
Pay your tax bill before they become due
The easiest way to get rid of a federal tax lien is to pay your taxes in full before they become due simply. It might sound very difficult, but you can make it possible by adjusting your withholdings or making estimated payments throughout the year. This will help you avoid any penalties or interest, and you won’t have to worry about the IRS putting a lien on your property.
Get on an IRS payment plan.
You can apply for an IRS payment plan if you can’t pay your taxes in full. This will allow you to make monthly payments to the IRS until your balance is paid in full. The payment plan will also help you avoid any penalties or interest.
You can choose between a guaranteed or streamlined installment agreement if you qualify for a payment plan.
Ask for an Offer In Compromise
This tempting settlement offer for back taxes falls short of the full amount you owe. Keep in mind that there are many restrictions, and the IRS typically accepts less than half of all proposals it receives each year. To be considered, you must have previously filed all of your tax returns and made the required estimated tax payments for the current year. You won’t be considered if you’re going through bankruptcy or being audited.
File an appeal
If you want to lodge a complaint about a lien or levy notice, you can request a collection due process hearing from the IRS Office of Appeals. Additionally, if you take issue with an employee’s decision surrounding a lien or levy, you can ask for a said conference with their manager and review your case through the Office of Appeals.
If you’re struggling with a tax lien and can’t seem to find a way out, you might want to consider filing for bankruptcy. This will relieve your tax debt and allow you to get on a payment plan.
Removing a Federal Tax Lien from the IRS
If the IRS determines that a federal lien was filed initially in error—such as when the wrong taxpayer is targeted for a debt—it will reverse (or “withdraw”) it. It’s as if the lien never existed in the first place in that situation.
If you think this might be your case and a lien was mistakenly filed against you, reach out to the IRS as soon as possible. After reviewing your account history that no taxes are owed, an agent will begin preparing the paperwork needed for the withdrawal of the false claim.
You or your tax professional can also request the withdrawal of a federal tax lien.
Releasing a Federal Tax Lien from the IRS
If the IRS agrees to a request for a “discharge” of property from your federal tax lien, the specific property is no longer subject to the lien. After the tax obligation has been paid in full, or if you establish a certain or simplified installment agreement, liens are released within 30 days.
Effects of Having a Federal Tax Lien
Federal Tax Lien Impacts Your Credit
Even though a tax lien does not appear on your credit report, the IRS publishes this information for everyone. Organizations such as lenders, landlords, and employers could learn about outstanding liens against your property. They may use that information to assess you—for example, whether or not to give you a loan, offer you a lease, or extend an employment opportunity.
A Lien Can Affect You Getting A Job
In extremely rare cases, a lien might affect your ability to keep or get a job. Just remember that liens will be visible not only to creditors but also on your credit report. So, if the company you’re applying to runs a credit check as part of its hiring process, you may have some difficulties. If this is ever the case, don’t hesitate to reach out to the IRS and request that they release the lien.
The IRS would be willing to give up the lien if you can show that all other factors are equal and each case is looked at on its own. You’ll have a better shot at getting the position now that you’ve released the lien. The IRS would accept this settlement because you will now earn an income.
How Can an Attorney at Seattle Legal Services help resolve your tax debt problems?
The IRS is a powerful organization, and they have many tools at its disposal to collect unpaid taxes. One of those tools is the federal tax lien.
A federal tax lien gives the IRS a legal claim to your property—including your home, car, bank accounts, and wages—until your tax debt is paid in full.
If you have a federal tax lien filed against you, it’s important to take action as soon as possible. The longer you wait, the more difficult it will be to resolve the issue.
The Notice of Federal Tax Lien is filed on IRS Form 668 (Y)(c) and is sent to taxpayers via certified mail. The key mistake taxpayers make is not picking up certified mail from the IRS, thinking that somehow the problem will disappear by itself.
If you have received certified mail from the IRS that contained a Notice of Federal Tax Lien, Call us Immediately to preserve your rights and protect you from the IRS.
At Seattle Legal Services, we understand the stress and anxiety that comes with dealing with the IRS. We’re here to help you resolve your tax debt problems and get your life back on track.
Call us today at 206-536-3152 to schedule a free consultation. We’re here to help you resolve your tax debt problems.
Frequently Asked Questions on Federal Tax Liens
What does it mean to have a federal tax lien?
A federal tax lien is a legal action taken by the government against your home for failing to pay taxes owed. A lien gives you the right to control any property you own, which includes property, personal property, and financial assets.
Does a federal tax lien ever go away?
The federal tax liens expire at the end of each year after you pay taxes on your property and income tax debts for up to five years after your return. The IRS will seek your debts for a limited period, and your debts will continue to accrue after the statutory limit. This includes 10 years from the date of tax assessment.
Are IRS tax liens public information?
A Notice of Federal Tax Liens will alert creditors that IRS claims are secured against a person who has assets that are not yours. Credit reports look for the credit report’s notice of federal tax obligations.
What happens when IRS files a tax lien?
The IRS will file a Notice of Federal Tax Lien in the county where you live or have assets. The lien is against all your property and rights to property, which gives the IRS a legal claim to your assets. The lien will show up on your credit report, making it difficult to get loans.
Does the IRS have to notify you of a lien?
Tax liens are filed by the IRS to protect their interest(s). A federal tax lien could affect your ability to obtain credit.
How long does a federal tax lien last?
Typically, a government entity has a 10-year period to pay tax liability for the tax owed. There may be circumstances that could prolong or suspend the 10-month collection period.
How do I check for IRS liens?
The government files a federal tax lien upon request by IRS. Interested in receiving an IRS tax lien? Information: 800 877-2910. Search the county recorders office in the county that
What does a notice of federal tax lien mean?
A federal tax lien occurs when the IRS assesses tax against you and sends you bills you have ignored. A government document is filed to remind creditors the government has a right on your personal property to which you are entitled.
How do I search public records for notice of a federal tax lien?
State and local governments are in charge of property taxes, so look there first for federal tax liens. Because your county may keep real estate sale and transfer records for your region, you should be able to find the information you need on its website.
How long does it take to get a federal tax lien withdrawn?
Withdrawing a tax lien is based on an IRS judgment, so you can’t simply notify county authorities that the debt has been paid. If the IRS decides in your favor, you will be notified of their ruling, and soon after, the tax lien should be withdrawn.