A federal tax lien can drastically impact your credit score and your overall financial well-being. The Internal Revenue Service (IRS) has the legal right to file a lien on your property when you have an unpaid federal tax debt.
A lien is a document the IRS files with the local government in the county where your property is located. The agency can file a lien on either a business or a personal property. When you need help removing or appealing a federal tax lien, we have the tools you need to overcome this difficult financial situation.
The IRS can place a lien on a property or levy a property if you owe outstanding tax debt. A lien gives the IRS legal rights to your property, whereas a tax levy allows the IRS to physically seize your property to pay off your tax debt. Other types of tax levies include garnishing your wages or taking funds from your bank account.
Image via Flickr by 401(K) 2013
If you own a property and sell it while a lien is in place, the lienholder has the legal right to the proceeds of the sale. In this case, the lienholder is the IRS. Additionally, a federal tax lien will show up on your credit report because it’s public record.
After the IRS has filed a lien with the county in which your property is located, you will receive a Notice of Federal Tax Lien. This lien will go into effect starting 10 days after the IRS sent a written notice demanding payment on the outstanding tax debt. If you do not receive a notice regarding the lien, the IRS might be sending it to an outdated address.
The IRS can file a lien on your home, vehicle(s), securities, and other assets, as well as your business property. Filing for bankruptcy will not eliminate tax debt, nor will it result in the removal of a lien.
The IRS will only remove a federal tax lien under certain circumstances.
Not all taxpayers qualify for the offer in compromise program, as certain restrictions do apply. If you’re not a candidate for this option, you can set up an installment plan to repay your tax debt. After you set up a streamlined or guaranteed installment agreement, the IRS will remove the lien within 30 days.
The IRS can either withdraw or release a federal tax lien. These two actions represent different outcomes for you. Withdrawing a federal tax lien is the same as rescinding it, which means it will not show up on your credit report and it will be as if the lien was never filed. Withdrawals often happen when liens are made in error, although the IRS does have a Fresh Start program that allows qualified taxpayers to have their liens withdrawn. To qualify for the program, you must have less than $25,000 in outstanding tax debt.
A federal tax lien release means the property is no longer restricted under the lien. The county will update its records to show that the lien has been released. However, even when a release occurs, the lien will show up on your credit report for up to 10 years. The IRS releases a lien when you set up a payment plan or pay the outstanding debt in full. In some cases, the IRS might release a lien if doing so is in the best interests of both the taxpayer and the federal agency.
When you’re facing a lien on your property due to outstanding tax debt, you might feel overwhelmed, fearful, and even unsure of what your financial future will hold. However, you don’t have to face this situation alone. Help is available to you through the IRS and its tax debt relief and Fresh Start programs, as well as through third-party tax relief solution agencies, such as Solvable. Through our site, you can review articles, connect with tax relief experts, and even find out how to submit an offer in compromise or set up an installment plan.
Visit Solvable to find out how we can help you remove a federal tax lien from your property and overcome your outstanding tax debt. We can assist with solutions and resources that will help you move toward financial freedom.