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Tax Debt Pros

Tax Liens

Help with IRS tax liensIf the IRS repeatedly notifies you of an outstanding tax debt but doesn’t receive payment they may eventually institute a lien or levy to collect the taxes owed. If you’re the victim or a federal tax lien or if you’ve received a tax notice, don’t wait, call Tax Debt Pros at 801-878-0363 now.

What Is a Tax Lien?

The government places tax liens on property in order to help secure payment of taxes that are owed. A tax lien is the government's claim to your property. Once a notice of federal or state tax lien is filed it attaches to just about everything you own, have rights to, or that property has rights to. This means that if you try to sell or make money off of your "property", the government has the right to take its cut to cover the amount of taxes owed, plus interest and penalties. A tax lien will remain in effect until the liability for the amount assessed becomes satisfied or becomes unenforceable by reason of lapse of time.

When and Why is an IRS Tax Lien Filed?

If you have unpaid back taxes and have not cooperated with the demands of the IRS to make the payments of the tax amount owed, it is likely that ultimately you will receive a tax lien, which will then lead to a tax levy.

Here is how the process works. The IRS will first send you a letter with an assessment of your tax liability. This letter will typically state the amount that is unpaid as well as late payment penalty and interest. If the assessment letter is ignored, the IRS will follow up with four more letters, CP-501, CP-CP-503, CP-504, and finally LT11/L1058 in most cases. These letters will get more and more threatening as the numbers get higher. The final one of the CP letters mentions its intent to levy. After these letters are sent to the taxpayer and there is no answer or the tax amount is not paid, the IRS decides that they are not able to collect the tax under normal circumstances, so the IRS will then file a Notice of Federal Tax Lien and possibly move onward with a levy. Once you obtain this tax lien, the lien has already been attached to your property. The purpose of the tax lien is to stop you from selling or borrowing against any of the major assets that you own. With a tax lien in place, it gives legal claim to the IRS over that piece of property that the lien was placed and removes your rights to the property. Moreover, tax liens are public records.

Effects of a Tax Lien

Once the notice of federal tax lien is recorded all of your creditors are notified that the IRS has a claim against all of your property and all property that is acquired after the lien is filed. The IRS has some of the most dominant collection devices and even if you owe other creditors, the IRS is typically a priority over them. For that reason, it will make it difficult to borrow or make large purchases in the future.

Once a lien is placed it will be difficult to conceal it from creditors because it will be easily available to the public through public records and tax lien notices are picked up by all the major credit reporting agencies. So in essence, a lien severely impacts your credit rating and may make it very hard to get a house, buy a car, get a new credit card or sign a lease.

If you do nothing about the tax lien, the IRS will eventually begin to seize your assets and sell them at a public or private sale. Once the IRS actually starts seizing your assets to satisfy the back tax liability, this is known as a tax levy. A tax levy is the most lethal weapon that the IRS possesses for collecting taxes. 

One thing to note, is even when a tax lien is "released," and your public records are updated as showing the tax lien was released, the history or the fact that you received a tax lien the first place may still hinder your ability to borrow, get a job, rent a house and so forth. The IRS in February of 2011 announced policy changes, whereby in most cases tax lien can be withdrawn or expunged from public records if the taxpayer sets up a direct debit installment agreement (DDIA), has one already setup (they can just request to have lien withdrawn), and owes $25,000 or less. Of course, exceptions do happen.

What to Do About a Tax Lien?

It is best to take action as soon as possible when a lien is put in place. It is not a good idea to try to wait it out until the statute of limitations expires because most likely you will get a levy placed on you before then and the IRS will seize your assets before the statute of limitations expires. In order to release a tax lien you will have to file a tax return or file your back taxes (if you have not), then decide whether you want to pay your back taxes in full, setup a payment arrangement with the IRS, or settle your back taxes if your financial situation qualifies you.

Tax Lien Frequently Asked Questions (FAQs) >>