What to Do About An IRS Lien

What Is A Tax Lien?

An IRS lien gives the government a legal claim to your property as security or payment for your tax debt.

A Notice of Federal Tax Lien can be filed after:

(1) IRS assesses the tax liability;

(2) IRS sends you a Notice and Demand for Payment. This is a bill that tells you how much you owe in taxes;

(3) You neglect or refuse to fully pay the debt within 10 days after IRS notifies you about it.

Once these requirements are met, this type of lien can be created for the amount of your tax debt. By filing notice of this lien, IRS is telling your creditors that the government has a claim against all your property. Please understand that this also includes property you acquire after the lien is filed.

The lien attaches to all your property, like your house and car, and to all your rights to property, like your accounts receivable if you are a business owner.

It can also be used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

Why Is An IRS Lien Important?

It is crucial to understand that the filing of a tax lien can severely harm your credit rating.

You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore, it is important that you work as hard and quickly as possible to resolve your tax liability before an IRS lien is filed.

How Can A Tax Lien Be Released?

IRS will issue a Release of the Notice of Federal Tax Lien under the following circumstances:

(1) Within 30 days after you pay the tax due, including interest, penalties, etc.;

(2) Within 30 days after IRS accepts a bond that you submit, guaranteeing payment of the debt.

Can You Appeal The Filing Of An IRS Lien?

Yes.

The tax code requires IRS to notify you within 5 business days that a tax lien has been filed. IRS can give you this notice in person, leave it at your home or where you work, or send it by certified or registered mail to your last known address.

You may ask an IRS manager to review your case. In addition, you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice.

It is imperative that you file your request by the date shown on your notice.

What Are Other Important IRS Lien Issues?

(1) The full amount of your lien will remain a matter of public record until it is paid in full. At any time, you can request an updated lien payoff amount.

(2) If you are selling your home or giving up ownership of other property, you may apply for a Certificate of Discharge.

If you're selling your primary residence, you may also apply for a taxpayer relocation expense allowance. Strict conditions and limitations do apply concerning the amount of the net proceeds you can keep.

(3) In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination.

(4) By law, a filed notice of tax lien can be withdrawn if:

(a) the notice was filed too soon or not according to IRS procedures;

(b) you entered into an agreement to pay the debt over time. Installment agreements , however, sometimes do require that an IRS lien be filed.

Now That You Know About An IRS Lien, Educate Yourself About The Entire Collection Process