Paying your taxes is a responsibility that comes with important consequences. When you fail to meet this obligation, the federal government can take a serious step by placing a federal tax lien on your property. In this article, we’ll address the most-asked questions about federal tax lien and provide you with valuable guidance on how to navigate the situation if you receive a certified letter indicating that you’re facing this challenge.
It’s worth noting that seeking the help of a specialized Tax Resolution Professional, who can handle negotiations with the IRS on your behalf, is strongly recommended. If you’re seeking assistance and would like to discuss your situation confidentially, you can easily reach out to us through our Get Relief page.
Top 10 Most-Asked Questions About Federal Tax Lien
1. What exactly is a federal tax lien?
A federal tax lien is a legal claim the government makes against your property due to an outstanding tax debt. This lien is filed with a county government, typically in the area where you reside or do business. Its purpose is to publicly inform creditors, potential buyers, and other interested parties that you owe a significant amount of money in taxes.
2. How will I know if there’s a tax lien on my property?
To determine if the IRS has placed a lien against your property, consider whether you’ve received notices requesting payment for back taxes. The IRS usually files a Notice of Federal Tax Lien after such notices if payments are ignored. You can also contact the IRS Centralized Lien Unit or perform a title search through your county’s Clerk of Courts website. You may also consult a tax professional for assistance in confirming and addressing any potential tax lien on your property.
3. How does a federal tax lien affect my assets?
A federal tax lien attaches to all your assets, such as real estate, personal property, investments, and vehicles. It also covers any assets you acquire when the lien is active. This means the government has a legal claim over these assets to secure your outstanding tax debt.
4. Will I be able to sell my property with a federal tax lien?
While you can still sell your property with a federal tax lien, the IRS has priority over the proceeds from the sale. This means the IRS will be paid before you receive your share from the sale. However, there are ways to work with the IRS to get a lien discharge or lien subordination, which can help facilitate property sales.
5. What’s the Impact on My Credit?
Once the IRS files a Notice of Federal Tax Lien, the information becomes part of the public record. Credit reporting agencies commonly include this information in your credit report. Consequently, having a federal tax lien on your record can adversely affect your credit score and hinder your ability to secure loans, credit cards, or favorable interest rates.
6. How Does a Federal Tax Lien Impact My Business?
A federal tax lien extends beyond your personal assets; it also attaches to your business property and rights over those assets, including accounts receivable. This can pose significant challenges for your business operations and cash flow, potentially leading to disruptions in day-to-day activities.
7. Can Bankruptcy Eliminate a Federal Tax Lien?
It’s important to understand that filing for bankruptcy does not automatically remove your tax debt or the Notice of Federal Tax Lien. Even after the bankruptcy process, you may still be responsible for addressing these obligations, complicating your financial situation further.
8. What’s the Difference Between a Lien and a Levy?
While often used interchangeably, “lien” and “levy” have distinct meanings. A federal tax lien signifies the government’s legal claim or interest in all your property, but it doesn’t entail immediate seizure or sale of your assets. On the other hand, a levy refers to the enforcement of the lien through the collection of owed taxes, which might involve actions like garnishing up to 75% of your paycheck or seizing funds from your bank account.
9. What steps should you take if you’re facing a federal tax lien?
According to the IRS, settling your tax debt in full is the most effective way to remove a tax lien. The IRS typically releases the lien within 30 days following your payment. However, paying the entire amount upfront isn’t feasible for many individuals. This is where seeking the assistance of a qualified tax resolution specialist comes into play. Contrary to the IRS’s suggestion, your initial move should be to engage a professional who understands the intricacies of the tax system.
10. Why should you consider a tax resolution professional?
Dealing with the IRS alone can be overwhelming and challenging, similar to representing yourself in court without legal expertise. A tax resolution expert can craft a tailored plan to address your specific situation. They can initiate negotiations with the IRS on your behalf and work towards easing your tax burden. Their experience can increase the likelihood of achieving a favorable outcome.
Help With A Federal Tax Lien
Understanding federal tax liens is crucial, especially for individuals facing outstanding tax debt. These liens can have a big impact on your assets and credit, as well as on your business operations. It’s important to remember that a federal tax lien is not the end of the road. It’s a hurdle that can be overcome with the right guidance and assistance. Seeking the help of a qualified tax resolution specialist can be a proactive step towards addressing the challenges posed by federal tax liens and finding a suitable resolution for your tax-related concerns.