When you do not pay a tax debt, the IRS can place a federal tax lien against your property. You may also receive a lien against you when you fail to pay a tax bill that the IRS sends you. The IRS files a public document, a Notice of Federal Tax Lien, in order to let creditors know that the federal government has the first legal right to your property. It’s so important to resolve a tax lien as soon as possible because the Notice of Federal Tax Lien is a public document.
There are additional consequences to having the IRS place a lien against you. Federal tax liens may generally prevent you from borrowing money and could make it difficult to do various things such as get a vehicle, rent a property, or even receive any type of credit. Sometimes, a federal tax lien can even go so far as to put your job in jeopardy.
Federal Tax Lien: “All Property and Rights to Property”
A federal tax lien isn’t exclusive to just one piece of property. It attaches to all property and property rights of the individual who is liable for the taxes. What some may not realize is that this also includes “after-acquired property,” which is purchased after the IRS files the lien.
Your federal tax lien may even be included in your credit report should a credit reporting company come across the Notice of Federal Tax Lien. Also, since the IRS can use the lien to assist with the collection of your balance, if your debt is significant enough, it may even try to foreclose on your home. Even after that, if you still fail to pay the lien in foreclosure, it can continue to attach to all of your property and property rights (as well as those which you acquire in the future), making the issue much more widespread.
Federal Tax Lien Release
While the very best way to deal with a federal tax lien is to prevent any actions that would allow it to occur altogether, if you should have any unpaid taxes, a qualified tax attorney can still help you to avoid one by using one of several different methods. In fact, even after the IRS has issued a Notice of Federal Tax Lien, a knowledgeable and experienced tax attorney can still help.
If the federal tax lien was improperly filed (e.g. it is inaccurate, has the wrong time of filing, etc.), you have the right to appeal and contest its validity. However, even if the lien has been properly filed, the right attorney can help you to obtain a release. An IRS lien release, which is the removal or resolution of an IRS lien, can be achieved through various means.
The best way to get rid of your federal tax lien is to pay your tax debt completely. Once you pay your debt, the IRS may release the lien as soon as within 30 days. However, there are other options, which can help to reduce the lien’s impact. They include the following:
- Discharge of property – A “discharge” removes the lien from a specific property. This can occur when you are selling certain pieces of property.
- Subordination – “Subordination” does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage.
If you are looking to borrow against a piece of property to pay your tax debt, subordination can help. Subordinating the lien can often help you to obtain a home equity loan, which can then be used to pay your tax obligation (whether fully or partially.)
- Withdrawal – A “withdrawal” removes the public Notice of Federal Tax Lien and assures that the IRS is not competing with other creditors for your property. It’s important to note though, that you are still liable for the amount due. A federal tax lien withdrawal can occur in many ways. You can pay your tax in full or enter into an installment agreement or an Offer in Compromise with the IRS. Additionally, the lien will be withdrawn once the statute of limitations has expired.
An IRS tax lien usually lasts for 10 years or until the statute of limitations on your tax debt has expired. Although the statute of limitations on your tax debt usually expires within 10 years, it can still be extended should the government file a lawsuit against you. This is a tactic that the government often uses when you have a significant amount of debt, in order to extend the statute of limitations or to foreclosure on your home.
Contact Our Experienced State Tax Attorneys
At Regal Tax and Law Group, PC, each client receives powerful representation and individualized attention. When you consult with us, we will take the time to help you understand all the options available to you so that you can make informed decisions about your tax matter. We have a well-earned reputation as trusted tax attorneys with the know-how to resolve the most complex tax controversies. Please contact our office today for a complimentary consultation.