What to Do About an IRS Tax Lien
Receiving notice of an IRS tax lien can strike fear in the hearts of almost anyone. If you have received notice of an IRS tax lien it’s important that you fully understand the lien process including the types of property the lien attaches to, the consequences of a tax lien, how long the lien can be attached, and the priority of the tax lien. You will also want to know what circumstances will prompt the IRS to remove the tax lien. Any time a taxpayer neglects to pay taxes owed to the IRS, a federal lien may be filed against real and personal property of the taxpayer. Bank accounts, as personal property, are often subjected to federal tax liens however difficulties can arise when the accounts are jointly held by the taxpayer and any other person. Generally speaking, if you have back taxes which remain unpaid and have ignored or failed to cooperate with IRS demands to make such payments, you will likely be slapped with an IRS tax lien.
How Does a Tax Lien Work?
The IRS will send you, the taxpayer, a letter detailing the amount unpaid along with late payment penalties and interest. If this first letter is ignored, a series of four more letters with serious titles (CP-501, CP-503, CP-504 and LT11 or L1058) will follow. Each letter will be more and more threatening, and the final one will note the IRS intention to place a lien on your property. Should you continue to ignore these notices, a Notice of Federal Tax Lien will be filed which prevents you from selling or borrowing against any assets you currently own. If you’ve received a Notice of Federal Tax Lien you can be assured that the lien has already been filed and made a public record.
What Does a Tax Lien Mean for Me?
Should you have an IRS tax lien placed against your assets you will likely be financially crippled for a significant period of time. You will be unable to receive credit in order to buy a car or home, and will have to rely on others for any financing needs. You will not be able to hold any assets in your name, and all your creditors, including your mortgage company will be notified. The IRS will keep a tax lien against you for as long as they legally can—typically ten years—or until you have paid your IRS bill. The IRS have made themselves the highest priority creditor, so selling your house or car would only mean the IRS would snatch any proceeds from the sale. Should you do nothing about the tax lien the IRS can begin seizing your assets, selling them at a public or private sale. Even after the tax lien is released you may find your ability to borrow, seek employment or rent a home still significantly hampered.
Getting Rid of Your IRS Tax Lien
The primary way to rid yourself of an IRS tax lien is to pay your tax debt in full at which time the IRS will release the lien within 30 days. Some taxpayers may qualify for subordination which does not remove the lien but allows other creditors to move ahead of the IRS, making getting a loan or mortgage somewhat easier. The IRS may offer you payment options in order to allow you settle your tax debt over time, and it is always a good idea to speak to an experienced tax attorney to discuss your options. Your attorney will be able to discuss the difference between a tax lien which secures the government’s interest in your property as opposed to a tax levy which actually gives the IRS the right to seize your property in order to pay your tax debt. Don’t wait until your IRS issues become serious—speak with an attorney to get the best legal advice before you take any action.