Congress passed the 16th Amendment in 1909.
The Amendment gave the federal government permission to tax individual personal incomes, regardless of their corresponding state’s population.
By 1913, Americans were required to pay federal income taxes.
Today, you can go to jail for failing to pay.
And even though it’s against the law to leave your taxes unpaid, taxpayers still owe the government over $130 billion in taxes.
If you wait too long to pay what you owe, the IRS could impose a tax lien on your personal property to secure payment.
Do you need tax lien help?
There are several ways to remove a tax lien.
Keep reading to learn all about a tax lien and how to remove one.
What Is a Tax Lien?
A tax lien is defined as a legal claim against an individual or business’s assets.
In general, a lien serves to guarantee payment of a particular debt.
In the case of a taxlien, it’s the IRS’ way of securing taxes owed by an individual or business who hasn’t paid their taxes.
If, after a tax lien, the obligation isn’t satisfied, then the creditor (or in this case, the IRS) may seize the assets on which the lien has been placed.
What’s the Process?
The IRS won’t place a tax lien on your assets without first making attempts for you to pay what you owe.
The process starts when the IRS sends a letter in the mail to a taxpayer.
The letter details how much is owed, and a date by which that amount must be paid by.
This is considered a notice and demand for payment.
If the taxpayer fails to pay what they owe or if they fail to contact the IRS to attempt to resolve the issue, then the agency is allowed to put a lien on the taxpayer’s assets.
The lien attaches to all assets, including property, securities, and any vehicles.
Plus, any assets the taxpayer acquires during the existence of the lien, are included.
For business owners, the lien will also attach to any accounts receivable and business property for the business.
Even if you file for bankruptcy, the lien will continue to follow you long after you file.
While most debts are wiped out by bankruptcy, federal tax debt is not.
How Does a Tax Lien Affect You
If you owe significant back taxes, the IRS could stick a federal tax lien on your assets that won’t just hurt your pockets.
You Could End Up with a Tax Levy
A tax levy is what comes after you don’t pay your taxes owed after the IRS files a lien against your property.
A tax levy includes “the power of distraint and seizure by any means,” so the IRS can seize and sell as they please, to alleviate your debt.
Your Creditworthiness Could Take a Turn for the Worse
Tax liens don’t show up on credit reports.
However, when the IRS puts a tax lien on your property, they can also file a public notice of the lien.
That notice tells your creditors or customers (if it’s your business) that the government has a right to your property, which will jeopardize your chances of getting a loan.
It’ll Cost You Time
In your attempt to get through the automated collection system (ACS), you’ll likely spend hours on hold on your phone.
Plus, you could get assigned to a revenue officer, which means you’ll spend time conducting in-person visits.
It Could Hurt Your Chances of Selling or Refinancing
It’s not uncommon for a tax lien to come up during a title search.
If you have any equity in a house that you’re trying to sell, you’ll probably have to use it to pay your taxes.
How to Get Rid of a Tax Lien
Sometimes the only way to get rid of a tax lien is to pay your tax bill.
Obviously, not everyone has the funds to do so, but if you do, it’s the fastest and surest way to gain back control and ownership of your assets.
If you can’t pay your bill in full, the next best option is to set up a payment plan.
With a payment plan, your balance will still accrue interest and penalties until it’s paid in full.
However, you can work together to establish a monthly payment that works for you.
If you agree to allow the IRS to take at least 3 payments directly from your bank account, they could agree to withdraw the lien from the public record.
You can also ask for an Offer in Compromise.
An Offer in Compromise is an offer to settle your amount due for less than the full amount you owe.
There are a few rules for applying.
For example, you must have filed all of your tax returns to date.
And if you’re currently being audited or in bankruptcy, you won’t get considered.
If you want a review of a lien notice, you can ask for a collection due process hearing.
You’d file your appeal with the Office of Appeals, and if you disagree with the decision letter, you can also ask the Office of Appeals to review your case and meet with your officer’s manager.
If you meet specific requirements, you could also be eligible for a lien withdrawal, a lien release, or a lien subordination.
Talk to an experienced tax professional for help figuring out which option works best for you.
Ask a Professional for Tax Lien Help
If a tax lien has been placed on your property and assets, the chances are that you need tax lien help.
Tax liens can be complicated, but they don’t have to be.
And if you can’t pay your bill in full, there are plenty of other options to use to get that lien lifted.
Do you want to know more about how we can help alleviate your debt?
Contact us for a FREE consultation!