How Does a Lien Originate
The IRS may bring a tax lien against you if you have a large tax debt. A lien is not the same as a levy. It does not automatically result in the loss of one's property. A lien gives the IRS creditor rights to the property under the lien, which gives the IRS its place in the hierarchy of creditor rights to property. In addition, while a significant tax debt exists, the IRS may also attach liens on any acquired future properties or rights to properties. Although IRS liens are no longer reported to credit agencies, they are reported on public records in the county where the associated property is held. It impairs one's ability to use the property to leverage for funds since a future creditor's rights will be lesser than the IRS's. Even though having an IRS tax lien is not ideal, there may be options to mitigate or eliminate the impacts.
Before a tax lien is issued, the IRS must assess a tax liability against you. The tax debt must be at least $5,000.00. A federal tax lien comes after the IRS assesses a tax against you and sends you a written warning demanding payment. If payment is not received within ten days, the IRS will be able to initiate a lien against your property. As of this point, the IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.
Ways to Deal with Liens
Paying your tax debt in full is the best way to eliminate a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt. If the government fails to lift the lien knowingly or unknowingly, you may file suit against the IRS.
At a minimum, IRS tax liens last for ten years. Under Section 6502 of the Internal Revenue Code, IRS tax liens can extend beyond ten years if:
- The statute of limitations is extended in connection with the execution of an installment agreement for payment of the tax debt;
- The taxpayer files an Offer in Compromise; An agreement to release a federal tax levy is accompanied by an agreement to extend the statute of limitations for enforcement of a federal tax lien; or
- The IRS refiles the lien within the required refiling period.
Additionally, under Section 6503 of the IRC, the period of the collection can be suspended due to events including:
- The issuance of a notice of deficiency.
- A court is seizing the taxpayer's assets.
- The taxpayer resides outside the United States for six months or longer.
- The wrongful seizure of the taxpayer's property.
- The wrongful placement of a lien on the taxpayer's property; and,
- The taxpayer filing for bankruptcy.
In certain situations, the IRS may withdraw a Notice of Federal Tax Lien even when you still owe the tax debt. The Notice of Federal Tax Lien may be withdrawn if the IRS determines:
- The Notice of Federal Tax Lien was not filed according to IRS procedures. Often a tax professional is needed to help establish this.
- You entered into an installment agreement to satisfy the liability unless the installment agreement is provided for the Notice of Federal Tax Lien.
- Withdrawing the Notice of Federal Tax Lien will allow you to pay your taxes more quickly; or
- Withdrawing the Notice of Federal Tax Lien is in your best interest and the government's best interest.
Ultimately, the best course of action is not to be subjected to an IRS tax lien by ensuring your taxes are paid on time. Suppose you find yourself in an unfortunate situation putting you in tax debt delinquency. In that case, it's time to retain a tax resolution firm like Harmon Tax Resolution, LLC, to help you immediately resolve your back-tax issues. Multi-licensed Tax Attorney, CPA, IRS EA - Will Harmon will work with you or your company to properly analyze your situation and identify the most expedient and effective way to get your taxes paid in full so that the wrath of the IRS doesn't fall on either you or your business.
Depending on the situation, Will Harmon provide you with the best course of action for dealing with the lien, or will he find a way to have it lifted altogether.
For a free consultation, call our office today to make an appointment. Call today so that you can sleep well tonight.