What is a Tax Lien?
A tax lien is a public statement that the IRS has authority over or rights to assets because of your federal tax liability. This notifies creditors that the government has a legal right to your property.
Tax liens are often conflated with a tax levy, but there are several key differences between the two collection strategies.
Unlike a tax levy, a tax lien is not a seizure of assets. If the IRS places a lien on your home or vehicle, you will still be able to live in your home and use your vehicle. Nevertheless, you will no longer have legal ownership. This means that you will not be able to sell or borrow money against your assets.
How does a Tax Lien Affect Me?
Once a Notice of Federal Tax Lien is issued, it is automatically bound to your belongings and limits your financial abilities with those possessions. The first would be your assets; these include (but are not limited to) your house, car(s), boat(s), your savings account, and even assets you may acquire in the future, such as a 401k.
Furthermore, a tax lien is a public notice of your tax liability.
When the IRS submits a Notice of Federal Tax Lien, this notice will appear in public records. This blemish on your public records notifies creditors of your unpaid taxes as well as the fact that the government has ownership over your assets.
A tax lien can additionally limit your ability to apply for or receive credit. A lien shies away creditors and potential buyers and makes it more difficult to get approved for loans or refinancing.
If you are a business owner, the lien attaches itself to all of its hard and soft assets, making your business just as tangible for seizure as your personal assets.
Not even bankruptcy will erase your tax lien. If you try to file for bankruptcy, your federal tax lien could persist.
How to Remove a Tax Lien?
Tax liens require action immediately. Paying your taxes in full is the easiest way to get rid of your Tax Lien.
Your lien will be discharged within 30 days of your payment being processed. However, most people owe amounts so significant, they cannot pay in full within such a short time frame. If you believe that the amount you owe is incorrect, you have the right to appeal the process.
Other options for removing the lien and resolving your tax bill:
- Discharge of Property – removes your lien from a specific property.
- Subordination – allows other creditors priority over the IRS, which is beneficial if you are trying to secure a loan or mortgage. You can also apply for a withdrawal of the tax lien.
Even if the tax lien is removed, you will still be liable for the full amount of your federal tax liability unless you take other actions.
Another option for removing a federal lien on your assets is by applying for an Installment Agreement or an Offer in Compromise. These are two tax relief solutions that can help you compromise a way to pay your federal taxes without entering a financial hardship or harming your credit.
Even though the IRS cannot seize assets with a tax lien, eventually, they will deploy a levy if nothing is done to blunt the effects of a tax lien.
If you have a tax lien call one of our experts at 833-419-RISE (7473) and they can help remove it for you.