What are IRS Tax Liens?A tax lien is often confused with a levy. A government tax lien gives the IRS a legal claim to your property as security or payment for your tax debt. Once a lien is filed, the IRS has claim against ALL your property, your assets if you own a business, and anything you acquire after the lien is filed. This means that if you go to liquefy any assets, the IRS has legal claim to that money. In this way, liens ensure that the IRS gets paid if your financial situation changes or if you sell assets. If you ignore the problem, the IRS may become more aggressive and place a levy on your account(s), even going as far as seizing your property. A Notice of Federal Tax Lien may be filed only after: - The IRS has assessed your liability.
- IRS sends you a “Notice and Demand for Payment” - a bill that tells you how much you owe in taxes.
- You neglect or refuse to fully pay the debt within 10 days after IRS notifies you about it.
However, the IRS will not generally file a lien if… - You’re in a payment plan and you owe less than $5,000,
- The debt is attached to a deceased tax debtor with no assets.
- Filing a lien will cause you to not be able to pay the liability (i.e. you can clearly document that the lien affects your ability to earn or borrow).
Note: If you owe over $25,000 in taxes, penalties, and interest, the IRS is already in the process of filing a federal tax lien on you. Anyone who tells you differently does not know how the IRS operates. Do I Have a Federal Tax Lien?- Check your credit report. TransUnion seems to be the most accurate in expeditiously recording tax liens. However, it is prudent to check all three credit reporting agencies.
- Check with your local county courthouse.
- You received IRS letter 3172.
After a tax lien has been filed, the IRS has five days to notify you. However, sufficient notification is considered sending CERTIFIED MAIL to your last known address or hand delivering the lien. This means, potentially, that you may not actually receive this notification. Caution!Once an IRS tax lien is filed, your credit rating may be harmed. A lien is a matter of public record and can be accessed by credit checks or even less scrupulous tax firms that act as the tax equivalent of an ambulance chaser. You may not be able to get a loan, buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary. However, if you resolve your tax liability by any means other than full paying, the IRS may file a lien anyway. If you will continue to owe over $25,000 or will be in agreement that will not full pay the liability timely, a lien is very likely. Appeal RightsYou have a right to a Collection Due Process Hearing. However, this must be requested through an appeal with Form 12153 within 30 days of the Notice of Federal Tax Lien in order to have the lien released. These hearings are done by an IRS Appeals Officer. Appeals Officers will consider: Many CDP Hearings are on-going. Therefore, you must reply timely to any requests for information and not have a frivolous argument. Lifting Federal Tax LiensUnknown to many, a lien is only released against your assets when the associated debt has been paid in full, proven invalid and abated, or when it expires. - “Paid in full” means that even in a payment plan, the tax lien will remain. The balance on your account must be $0 to have a lien lifted.
- “Abatement” refers to the process whereby it is proven that either the liability is invalid or certain processes leading to the lien were improperly followed.
- “Expiration” happens 10 years after the date your liability was assessed. HOWEVER, this time period can be extended for a number of reasons, such as filing bankruptcy or reducing a lien to a judgment.
Further ReadingTax Debt Solutions |