The IRS may place a lien on personal or real property to secure payment for taxes when a taxpayer is delinquent or fails to pay his or her taxes. A lien gives the IRS legal claim and right to a taxpayer’s property, including personal and real property, and earnings such as the accounts receivable of a business. These may be claimed as security or payment for tax debt. The IRS may file a Notice of Federal Tax Lien under the following conditions:
The taxpayer liability has been assessed;
a Notice and Demand for Payment notifying the taxpayer of how much he or she owes in taxes has been sent;
and, the taxpayer has neglected or refused to fully pay the debt within 10 days of being notified.
Federal tax liens are public records. Once a Notice of Federal Tax Lien has been filed, the taxpayer’s creditors are publicly notified that the IRS has a lien against the taxpayer’s property, including property acquired after the lien is filed. Liens appear on credit reports. Consequently new lines of credit such as a home or car loan, credit card, or rental lease become difficult to obtain. Additionally, once a lien is filed against your property, you cannot sell or transfer the property with clear title.
A Lien Can Be Released
Liens may be released, subordinated, discharged, withdrawn, or appealed. For a lien to be released you must fulfill your tax liability – including interest and any fees that your state or jurisdiction charges to file and release the lien. The release is issued within 30 days of full payment of your taxes and accompanying interest and fees or upon entering a payment plan or offer in compromise to pay the debt. Most liens are released automatically after 10 years if they are not re-filed by the IRS for another 10 years.
Subordination of a Lien
Subordination of a lien occurs when a federal tax lien is made secondary to another lien. A lien may be discharged when you give up ownership rights to your property, i.e. sell your property, and use the proceeds to satisfy your tax debt. The application for discharge of a lien should be submitted at least 45 days before the transaction is scheduled to take place, and each item requested to be discharged requires its own application.
A lien may be withdrawn if:
The notice was filed incorrectly or prematurely;
you entered into an agreement to pay your tax debt;
the withdrawal of the lien will accelerate the collection of the tax;
or, it is in the best interest of the government to withdraw the lien. A lien may be appealed under some circumstances.
When faced with IRS tax debt, it is best to obtain professional help and resolve the issue before a Notice of Federal Tax Lien has been filed. However, if you find yourself in a situation where a lien has been filed against your property, it is imperative to act immediately. Call the professionals at Tidy Tax Services now to benefit from our expertise and experience. Get us working for you today. 866.749.7717