About Tax Liens
A tax lien is a public declaration indicating that the IRS holds authority over or claims rights to assets due to your federal tax debt. It serves as formal notice to creditors that the government maintains a legal interest in your property.
While often confused with a tax levy, a tax lien operates differently in collection procedures. Unlike a levy, a lien does not entail the physical seizure of assets. If the IRS imposes a lien on your property, such as your home or vehicle, you retain possession and usage rights. However, you forfeit legal ownership, restricting your ability to sell or leverage these assets for borrowing purposes.
What are the Implications of a Tax Lien on Me?
When a Notice of Federal Tax Lien is issued, it automatically encumbers your assets, constraining your financial flexibility with those possessions. These assets encompass various items, including your residence, vehicles, savings accounts, and any future acquisitions like retirement funds.
Moreover, a tax lien serves as a public declaration of your tax debt. Once the IRS files a Notice of Federal Tax Lien, it becomes a matter of public record. This notation in public records alerts creditors to your outstanding tax obligations and the government’s claim to your assets.
Furthermore, a tax lien can hinder your ability to obtain credit. It deters potential lenders and purchasers, making it challenging to secure loans or pursue refinancing options.
For business owners, the lien extends to both tangible and intangible assets of the business, rendering it vulnerable to seizure, akin to personal assets.
It’s worth noting that even bankruptcy doesn’t absolve you of your tax lien obligations. In the event of bankruptcy filing, your federal tax lien persists.
How Can I Get Rid Of A Lien Against Me?
Immediate action is crucial when dealing with tax liens. While paying off your taxes in full is the simplest way to lift the tax lien, this may not always be feasible within the given timeframe, especially for substantial amounts owed. If you dispute the owed amount, you have the right to appeal the process.
Here are some alternative options for resolving the tax lien and settling your tax debt:
- Discharge of Property: This removes the lien from a specific property.
- Subordination: This grants other creditors priority over the IRS, which can be advantageous when seeking loans or mortgages. Alternatively, you can request a withdrawal of the tax lien.
- Even after the tax lien is removed, you remain responsible for the entire federal tax liability unless you take further action.
Another avenue for addressing a federal lien on your assets is by applying for an Installment Agreement or an Offer in Compromise. These solutions can provide a pathway to resolving your federal taxes without causing financial hardship or damaging your credit.
While the IRS cannot seize assets with a tax lien alone, they may resort to a levy if no action is taken to mitigate the consequences of the tax lien.”
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