A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:
- Assesses your liability;
- Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
- You neglect or refuse to fully pay the debt in time.
Then, 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.
How to Get Rid of a Lien
Obviously, paying your tax debt – in full – is the best way to get rid of a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt. But for those who don’t have the present ability to pay, there are options.
- Discharge of property — If you want to sell or refinance the property, there is an application procedure that will allow you to sell the property free of the lien. However, if there is equity in the property, the IRS will want it.
- Subordination — This procedure does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage.
- Withdrawal — Under certain circumstances, like hardship of loss of a job due to a lien, the IRS may simply remove it.
How a Lien Affects You
- Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien. If you don’t want to sell property, it does not mean the IRS will take it. The IRS will not have priority over liens and mortgages that are filed before the IRS lien.
- Credit — Once the IRS files a Notice of Federal Tax Lien, it may show up on your credit report, and limit your ability to get credit.
- Business — The lien attaches to all business property and to all rights to business property, including accounts receivable.
- Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.
If you or a client need help fighting off the IRS, call Jeffrey R. Siegel, your Kansas City tax attorney. We help with IRS liens, wage garnishments, levies, offers in compromise, innocent spouse relief and installment agreements. Bring back some stability to your life, and call (913) 735-4829.