What You Need to Know About Federal Tax Liens

Federal tax lien help from Wiggam Law

Have you ignored an IRS notice that you owe tax debt? If so, the agency’s next step could be placing a lien on your property.

A federal tax lien is a legal claim by the government against your assets that is filed when you have failed or neglected to pay your tax debt. The agency can place a lien against all of your property, including real estate, personal property, bank accounts, securities, and other financial investments. As long as the lien is active, it can also attach to any property you acquire in the future.

Collections Process 

The IRS collection process begins when you first fail to pay your taxes. The agency will send you a bill with the amount you owe. This first bill will include penalties and interest on the unpaid balance, and demand full payment. The bill, or notice, will also give you a deadline by which you must pay or at least respond to the IRS to set up a payment plan. 

When you fail to respond to that first letter by the due date, a federal tax lien is created and attached to your property. The government also files a Notice of Federal Tax Lien with local and state authorities. This notice is a public document, and alerts other creditors that the IRS has placed a claim against your property.

Lien vs. Levy 

A lien is not a seizure of your property. That’s called a levy, and is another tool the IRS can use to satisfy your tax debt. Instead, with a lien the IRS has first rights to use proceeds from the sale of your property to pay off tax debt.

Impact of a Lien 

While a federal tax lien does not force you to sell your property, it can have an impact on your ability to sell it. A federal tax lien tends to stay with the property until the tax debt is paid and the lien cleared by the federal government. This can be particularly troublesome when trying to sell a house with a tax lien. Many potential buyers shy away from homes with tax liens.

Federal tax liens used to show up on a taxpayer’s credit report for up to ten years when tax debt was unpaid, and for as long as seven years after payment. But beginning in 2018, the three major credit reporting bureaus stopped including liens as part of taxpayer credit reports.

How To Get Rid of a Tax Lien

The best way to get rid of a lien against your property is to pay your taxes in full. The federal government will release the lien within 30 days of you satisfying your tax debt, including penalties and interest.

If you enter into an installment agreement or offer in compromise to pay your tax debt over time, the IRS may withdraw its lien. A withdrawal is different from a release. A lien release clears your property of the lien as well as clears the public Notice of Federal Tax Lien. The IRS files a Certificate of Release of Federal Tax Lien with the same local and state authorities with which it filed the original notice. With a withdrawal, the notice is withdrawn from public record but the taxpayer is still liable for the unpaid tax debt. 

Appealing a Federal Lien

You do have the right to appeal a federal tax lien. Within five days of the first filing of the Notice of Federal Tax Lien, you should receive a letter from the IRS titled Notice of Federal Tax Lien Filing and Your Right to a Collection Due Process Hearing. That notice will include a deadline by which you can file a request for a hearing with the IRS’s Appeals Office. The Appeals Office is independent from the IRS and will look at all the facts as well as applicable law. The Appeals Office will determine whether the Notice of Federal Tax Lien should remain filed, or be withdrawn or released. 

Have Questions? Call the Experienced Tax Attorneys at Wiggam Law

If the IRS has placed a lien on your property, we can help. The experienced attorneys at Wiggam Law can evaluate your situation, recommend a course of action, and assist in negotiating with the IRS. Contact metro Atlanta’s top tax attorneys clicking here or giving us a call at (404) 233-9800.