Washington state is considered a fairly great place when it comes to state taxes. As of early 2024, the state doesn’t require any personal or corporate income tax. However, if you own a business in this state, you need to file and pay a variety of business returns such as sales and business and occupation tax.
If you fall behind on your tax obligations, the Washington State Department of Revenue will have the authority to leverage collection efforts against you until you pay what you owe. Have you recently started to get behind on filing your returns and paying your taxes? If so, then it’s important to address the situation as soon as possible.
If you don’t, then you’ll likely start to accrue increasingly compounding penalties and interest on your tax debt. Things can also continue to progress until you face tax liens in Washington State. At that point, your property could be at risk and the Washington State DOR might start to consider more serious consequences considering your failure to work with them.
Learn everything you need to know about tax liens in Washington and how to handle them below.
What is a Washington State Tax Lien?
A Washington State tax lien is a type of collection effort levied by the Washington State Department of Revenue against taxpayers who’ve fallen behind on paying off their tax debts. A lien is an official legal claim against a person’s or business’s assets, and the purpose of the legal claim is to ensure that the party resolves their debt before selling or profiting off of the property or asset. The lien won’t prevent the party from selling the asset, but if it does get transferred in some way, then the Washington State Department of Revenue will have a legal claim to it first.
For example, say that the WA DOR issues a lien and it attaches to all of your property. You decide to sell a vehicle for $5,000. You owe $1,000 on a car loan which goes to your lender. At that point, the DOR has the right to the remaining $4,000.
A lien can be attached to an individual’s property and/or a business’s property. It attaches to a person’s vehicles, securities, or even accounts receivable if the taxpayer is a business. Washington State isn’t the only entity that can leverage a tax lien—federal tax liens can also be issued by the IRS.
Is a Tax Lien the Same Thing as a Washington State Tax Warrant?
At times, you’ll hear the term tax lien used interchangeably with tax warrant. They are virtually the same thing. When the DOR issues a warrant, it acts as a lien on your property.
Here is how the process works:
- A taxpayer owes a debt and they do not address it with the Washington DOR.
- The DOR notifies the party about the tax debt delinquency.
- If you don’t respond, penalties and interest will be charged to your account.
- If you don’t reply to notifications about these penalties, then a Revenue Agent from the DOR will be assigned to your tax case.
- The Revenue Agent will attempt to contact you and resolve your debt.
- If you don’t respond, then the Department will issue a tax warrant.
- If the warrant isn’t paid within ten days, then it gets filed with the County Superior Court.
- The tax warrant will establish the lien.
The word ‘warrant’ sounds like it deals with criminal charges, but a tax warrant is a civil issue. You won’t get put in jail or face criminal penalties over a civil tax warrant. That said, if your tax warrant isn’t paid in 30 days, then there could be a hearing to have your business’s tax registration endorsement revoked.
When Will the Washington State DOR Issue Tax Liens?
A Washington State tax lien shouldn’t come as a shock to a taxpayer. This type of collection effort is only leveraged when the responsible party fails to make payment arrangements and doesn’t respond to notifications from the Department of Revenue. A tax lien will be established when your tax account is delinquent, you haven’t responded to notices, and you’ve already been subject to other financial penalties from the Department of Revenue.
How Will a Washington State Tax Lien Impact You?
If a lien is on your property, then that can prevent you from selling the property, obtaining a loan using the property as collateral, and more. A lien won’t directly impact your credit score, as it won’t show up on your report. That said, it could still impact your ability to take out new lines of credit.
That’s because lenders can conduct a tax lien search, uncover the issue, and use that information to decline to fund your loan. Anyone can conduct a Washington State tax lien search by visiting the recording department of the county auditor’s office. This search can also be conducted online in some counties that publish this information digitally.
How Long Do Washington State Tax Liens Last?
In Washington, a tax warrant is enforceable for up to ten years from the date of the filing. After that time period, the statute of limitations for the tax debt will expire, and the lien will get removed. This will only happen without action from the DOR, though. A petition can be filed to extend the lien for an additional ten years.
How to Get a Washington State Tax Lien Removed
Clearly, settling a tax debt dispute with the Washington State Department of Revenue is very important once they’ve started to leverage a tax lien against your assets. If you fail to act, then your property or assets will be at risk.
The good news is that there are a few easy ways to have a tax lien removed from your accounts. Below, we’ll go over a few different strategies that you can use to resolve the tax warrant and get back on the good side of the Washington Department of Revenue.
Talk to a Tax Resolution Lawyer
When you’re facing a state tax lien, the situation has progressed to a concerning level. At this point, your best decision might be to consult with a tax resolution lawyer about your options and best course of action. In general, a lawyer will be able to fully inform you about your situation, possible resolution strategies, and the best path forward.
They’ll consider your specific financial circumstances and your ability to pay when helping you come up with a good solution. If you need to negotiate with a Revenue Agent from the DOR, then your lawyer can also communicate for you on your behalf.
Important Tip: Analyze Your Entire Financial Situation
Whether you consult with an attorney or not, it’s a good idea to analyze your entire financial situation before attempting to resolve your tax situation. Once you’re fully informed about your financial picture, you’ll be in a better position to make good decisions on how to handle your tax lien and tax debt.
Take a look at exactly how much tax debt you owe including all the penalties and interest on your account. Then, consider your ability to pay. You’ll want to look at your current income, any savings you have, your perceived future earnings, and any other expenses and debts you’re currently balancing. Considering your property could be at risk, it might be necessary to rework your budget to ensure you have some extra money to put towards your tax debt.
Pay Off Your Tax Debt Balance in Full
The number one best way to get rid of your tax lien in Washington State is to simply pay off your entire tax balance in full. Once you pay off what you owe, the DOR will immediately rescind the lien. Not only will your property be safe and secure, but your tax situation will also be resolved as well!
To ensure you completely fix your tax problems, you need to take a good look at your tax bill. If you haven’t been keeping up with the notices sent by the DOR, then you might not realize how many penalties have accumulated on your account. What’s more, interest on any existing debt has likely been building up over time. That said, you’ll want to know exactly how much you owe, which is likely a lot more than you originally owed to the DOR.
Once you know what you owe and you have the money to pay off your debt, you can get in touch with the Washington State DOR and submit your payment.
Consider a Payment Plan with the WA DOR
Another way to get rid of your tax lien is to get in touch with the Washington Department of Revenue and set up arrangements to pay off your tax debt. If you know you can’t make your payment in full, then it’s possible you might qualify for a self-service payment plan.
Here is what you need to qualify:
- You received a Notice of Balance Due and owe the DOR less than $100,000.
- You have a bank account where you can schedule direct debit payments.
- You haven’t had a DOR payment plan within the last 12 months.
- You haven’t been subject to tax evasion or avoidance penalties.
- You complete a financial statement and the DOR determines you qualify for a plan.
If approved, then you’ll be able to pay down your tax bill over a period of three, six, nine, or 12 months. As long as you continue to make your proper payments, the Department of Revenue won’t re-initiate collection actions.
Ideally, you should reach out to set up the payment plan as soon as possible. The WA DOR requirements for self-service payment plans say that you don’t qualify if there is an active warrant or tax lien against you. However, the DOR website also says that setting up a payment plan can stop the state from acting on a lien or warrant.
Research Potential Relief Options
In very limited circumstances, the DOR might offer some tax debt relief. Unlike the federal IRS agency, the Washington State DOR doesn’t offer currently non-collectible status, but the agency offers penalty abatement and rule 100 settlements for qualifying taxpayers.
That said, the DOR won’t pursue collections from you if you can genuinely prove to the tax agency that you’re experiencing financial hardship. This type of relief isn’t granted that often, though, so your circumstances will have to be pretty bleak to qualify.
You Have the Right to Appeal the Lien
Another way to get rid of a lien is to successfully appeal it. This type of strategy is difficult and complicated, though, and it will only work if the DOR genuinely made a mistake in assessing your tax situation, a penalty, or interest.
The Best Ways to Avoid a Tax Lien
It’s far easier to avoid getting hit with a tax lien than it is to get rid of one. That said, there are a few different strategies you can apply to help you avoid any future Washington State tax lien issues.
1. Know Your State Tax Obligations
First, you need to know your state tax obligations. Most taxpayers are aware that they have to pay federal taxes, but sometimes, state tax situations fall by the wayside. This is especially true in states like Washington, where there is no state income tax.
Considering there’s no income tax, that can confuse some taxpayers who do owe taxes for other things. Get informed about your obligations by either reading up on your local tax laws or contacting a lawyer who can fully inform you about your rights, duties, and obligations.
2. Keep Up-to-Date on Due Dates, Changes, and Tax Laws
Learning about your tax obligations once usually isn’t enough. You should do your best to stay up to date with tax changes that could impact your account. If you make any significant life changes, like starting a business, then take that as an opportunity to re-research important tax laws that might apply to your new situation. Staying informed will help you reduce the chances that you might face a tax lien.
3. Start Tracking Your Finances
If you’re not doing so already, then your next step is to start completely tracking your finances. If you have a business, then you need to start tracking how much you owe in taxes and where your money is going. Keeping up with your finances and retaining important documentation that proves your financial situation can help you if you later run into tax problems.
4. File on Time: Think About Going Digital
Next, make sure you file your taxes on time. It’s also a great idea to start thinking about going digital if you don’t already electronically file your taxes. When you file electronically, the chances of making an error are reduced significantly. When you file on time, you not only avoid liens, but you also get to avoid getting hit with penalties.
5. Make Your Estimated Quarterly Payments
If you’re a business, then you might be required to make estimated quarterly payments. If it’s possible, then you want to keep up with these payments to ensure official Tax Day goes as smoothly as possible. If you make mistakes or fail to make quarterly payments, then your yearly bill might seem massive and unmanageable.
5. Consider Consulting With a Tax Pro if You Have Tax Questions
Do you have more tax questions? Are you worried about speaking to a DOR Revenue Agent one-on-one? If so, then consider consulting with a tax pro before you attempt to get in touch with the DOR. Hiring a lawyer can help you ensure that your rights are upheld and your best interests are considered throughout the process.
Are You Ready to Talk With a Tax Resolution Specialist?
Tax liens in Washington State should be avoided whenever possible. In general, these types of tax consequences won’t pop up out of nowhere. Typically, the taxpayer is well aware of their tax situation and delinquency before the situation progresses to the point of having a lien issued.
The good news is that you always have the ability to resolve your tax situation and get back in good standing with the Washington Department of Revenue no matter how far you’ve let your tax situation go. However, once a warrant has been issued, you should reach out for help as soon as possible before the state acts on the lien and turns it into a levy.
To get back in a good position, you’ll need to take a good look at your overall financial situation, come up with a plan to pay back what you owe, and start to file and pay your taxes on time moving forward. Depending on your tax situation, it might be a good idea to talk to a tax resolution specialist about the best way to handle your past, current, and future tax situation.
If you’re in Seattle or a nearby area, then we’re ready to help. Schedule a meeting with our tax resolution lawyers now to get started on your tax resolution journey today.