Everything You Need to Know About Tax Liens

The Buchalter Law Group

The consequences you may face as a result of debt can vary depending on state law, the type of debt you owe, the type of entity that owns the debt, and how much time has passed since you last made a payment.

If your creditor is the IRS, your consequences may be severe. Unlike other creditors, the federal government does not need to take you to court before resorting to drastic collection tactics.

The primary method the IRS will use to collect tax debt is a federal tax lien. This is essentially a claim the government places on your property (e.g. real estate, personal possessions, investments, etc.) if you don’t pay your taxes.

Once the IRS attaches a lien to your property, the government has the right to take it from you. The lien may apply to all assets you own and acquire during the life of the lien, including business property and accounts receivable. A lien can also significantly damage your credit.

When Can the IRS Place a Lien on Your Property?

While the government doesn’t need to file a lawsuit against you, it will notify you before it places a lien on your property.

Generally, the IRS will:

  1. Assess your liability (i.e. determine what balance you owe)
  2. Send you a Notice and Demand for Payment
  3. Place a lien on your property if you fail to pay by the designated deadline
  4. File a public document (Notice of Federal Tax Lien) to inform your creditors about the lien

If you don’t pay what you owe after the government places a lien on your property, it can levy (i.e. seize) the property and sell it to cover your deficiency.

How to Remove a Tax Lien

The best way to get rid of a lien, of course, is to pay what you owe in full. Once you do, the IRS must release the lien within 30 days.

In some cases, however, the IRS may accept an Offer in Compromise (OIC). An OIC is essentially a tax debt settlement, in which the IRS agrees to take less than what you owe and release your liability for the rest. If the IRS accepts an OIC, it will remove the lien from your property.

Under the Fresh Start Program, you may become eligible for a lien release if you bring your balance down to less than $25,000. Generally, however, you will need to work with the IRS to pay what you owe. This might involve arranging a payment plan.

In some cases, the IRS places a lien on a taxpayer’s property in error. If you can demonstrate this error, the IRS should remove the lien. This is called a withdrawal, in which the lien is removed from your record as though it never existed. Similarly, you may be able to appeal the lien, but you will need support from a qualified legal team.

Can Bankruptcy Remove a Lien?

In most cases, bankruptcy doesn’t discharge tax debt or remove liens. If your tax debt is deemed dischargeable, you will need to take extra steps to remove the lien.

Ultimately, you will need to work closely with an attorney to determine how bankruptcy may affect your financial situation.

Let Our Team Handle Your Case

At The Buchalter Law Group, our goal is to arm our clients with as much information as possible. This allows them to make fully informed decisions about their debt and related issues. We can guide you through complex legal processes, recommending the most appropriate strategies for your unique situation. If the government has attached a lien to your property, we are ready to help you find and implement a viable solution as soon as possible.

If you wait to address your debt, the consequences will become more severe. Call (321) 320-6088 or contact us online to begin planning your course of action today.

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