What Is a Tax Warrant?

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Staff Writer - Angela
October 29, 2018

A tax warrant is a legal action that can be brought against you by the state or federal government if you fail to pay your taxes. Also called a lien, the warrant is a public record that allows the government to claim your personal property or assets to satisfy the unpaid taxes. If you have unpaid taxes and have received notification of a tax warrant, here’s what you need to know.

How Does a Tax Warrant Work?

When you file your taxes, you’ll receive a correspondence from the IRS labeled Notice and Demand for Payment, otherwise known as a bill. If you do not make arrangements to pay the past-due tax amount, whether as a lump sum or by entering into an installment agreement, the IRS will make attempts to collect the tax debt by other means.

A tax warrant usually occurs during the later stages of the IRS collection process. This process typically occurs as follows:

  • If you don’t pay your first bill, you’ll receive at least one additional tax bill.
  • If you ignore the second bill, collection action will begin.
  • If you receive tax refunds in subsequent years, this will be applied to your outstanding tax debt until it is fully paid.

If you do not agree with the amount of assessed tax, contact your local IRS office immediately. Collections action will be delayed until it processes your appeal. You should also contact the IRS right away if you are currently filing for bankruptcy. Although your debt will not be discharged, it will be taken into account by the bankruptcy court. Collection actions will also be suspended during bankruptcy proceedings.

What Should I Do if I Can’t Pay My Taxes?

If you are unable to pay the amount due, you can enter a payment plan. You will not be subject to IRS collections actions if you are making a good faith effort to pay as agreed in installments. You can apply for a payment plan online.

Another option is an offer in compromise, in which the IRS agrees to settle your tax debt for less than you owe. This is rarely approved, but may be an option if you can show you do not have the assets and income to pay the tax debt in question and that paying the full amount would create undue economic hardship.

You can also request that the IRS note your account as currently not collectible (CNC). This means you are unable to afford any payments at this time. This does not necessarily prevent you from receiving a tax warrant, however.

You also have the right to request a collections due process hearing with the IRS Appeals Board. This is especially important if you have received notice of a lien or levy.

How Can I Remove a Tax Warrant?

The only tried-and-true ways to remove a tax lien are either by paying the tax owed in full or by outlasting the statute of limitations for the debt to be collected (10 years for federal taxes and up to 20 years for state taxes, depending on the state). However, you can take steps to reduce the impact of the lien on your finances. Based on your specific situation, options may include:

  • Discharge of property, which removes the lien from certain assets only
  • Subordination, which may make it easier for you to qualify for a loan or line of credit
  • Withdrawal, in which the loan is removed but you are still responsible for paying the past-due amount

In general, you must meet the following criteria to qualify for these options:

  • You have made arrangements to pay your tax liability.
  • You owe less than $25,000.
  • Your debt will be paid off within 60 months under your installment agreement.
  • You have made at least three direct debit payments under your installment agreement.
  • You have not defaulted on any previous installment agreement.

What Is the Impact of a Tax Warrant?

A tax warrant is a public record that is attached to all your current and future assets. You will be unable to sell or refinance these assets while the lien is in effect. If you do not attempt to settle your tax debt with the IRS, your property can be seized to satisfy the debt. This could include your home, vehicle, and/or savings and retirement accounts.

Having a lien on your record will also lower your credit score. This can impact your ability to qualify for a mortgage, car loan, or credit card. When creditors become aware that you already owe money to the IRS that you are unable to pay, they will be wary of your ability to pay back an additional loan.

What Is a Levy?

The IRS can seize property under a tax warrant to satisfy your unpaid tax debt, either by taking possession of and selling real estate, removing funds from bank accounts, and garnishing your wages. Banks and employers are legally bound to comply with the terms of an IRS levy.

When your account reaches this point in the collections process, you will receive documents entitled Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It is important to consult with a qualified tax attorney who can represent you before the IRS.

You have the right to request an immediate levy release. This can be done if:

  • You have paid the taxes you owe.
  • The statute of limitations on your tax debt has ended.
  • You will be able to pay a portion of your tax debt if the levy is released.
  • You will be unable to meet basic living expenses as determined by the IRS because of the levy.
  • The value of the levied property is greater than the outstanding tax debt.

 

 

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