IRS Tax Liens
The Internal Revenue Service (IRS) can be incredibly aggressive when collecting unpaid back taxes. Taxpayers who owe the IRS for failure to file or pay may face harsh collection actions for their tax liability, such as a tax lien. A federal tax lien is a collection action that the IRS can impose on delinquent taxpayers. Federal tax liens are legal holds on a taxpayer's property due to federal tax debt. The IRS generally files tax liens after notifying the taxpayer of their outstanding debt several times with no response. Once the IRS files a notice of a federal tax lien against the taxpayer, the IRS has a legal claim to the delinquent taxpayer's assets. In this case, assets may include:
- • The taxpayer's home
- • The taxpayer’s vehicles
- • The taxpayer's bank accounts
- • Any other property with monetary value
Federal tax liens have severe implications, and the notice of a federal tax lien will be filed in public records. Tax liens can make it difficult for individuals to buy or sell property (particularly real estate). The implications of a federal tax lien are intense and can even override bankruptcy claims.
Consequences of a Tax Lien:
Taxpayers dealing with an IRS tax lien are already up to their knees in back tax debt. Once the Internal Revenue Service (IRS) decides to file a lien, more consequences will follow. Although creditors no longer include liens in credit reports, liens can still negatively impact taxpayers. Possible consequences are as follows:
Adverse Effect on Home Sales
An IRS tax lien can be detrimental to taxpayers looking to sell or refinance their homes. For example, a title search might reveal a tax lien. As the lien is a government claim to the property, the delinquent taxpayer will likely have difficulty selling or refinancing their home with a lien attached.
Time Consuming Collection System
The Internal Revenue Service (IRS) processes thousands of files and, as a result, taxpayers with debt will likely be entered into an automated collection system. This process can be immensely time-consuming.
IRS Files a Tax Levy
Once the IRS has filed a tax lien against a taxpayer and the taxpayer still has not paid back the debt, the next action the IRS will take is filing a tax levy.
Differences Between IRS Tax Liens and IRS Tax Levies:
Although there are similarities between a tax lien and a tax levy, the two are not mutually exclusive. The Internal Revenue Service (IRS) may utilize both IRS tax liens and IRS tax levies as a means to settle delinquent tax debt. However, a levy allows the government to seize and sell property to settle debt. A lien, on the other hand, is simply a legal claim to your property. A lien can lead to a levy if the taxpayer neglects their tax liability.
Ways to Resolve Federal Tax Liens:
Tax liens can be resolved in one easy step-- pay the tax debt back in full. Once the debt has been fully paid off, the Internal Revenue Service (IRS) will have 30 days to release the lien. Taxpayers who pay the debt fully in cash will have their federal tax lien released when the payment is received.
IRS Lien Withdrawal
The IRS will withdraw a lien under one of the following conditions:
- The lien was filed too soon, or the lien was not following the IRS regulations.
- Withdrawing the lien will speed up the collection process.
- It is in the best interest of the taxpayer and the IRS to withdraw the lien.
Taxpayers must also complete and submit IRS Form 12277 and establish compliance with the IRS to qualify for an IRS lien withdrawal. In addition, the IRS Fresh Start program offers a Direct Debit Installment Agreement in which taxpayers may have their lien withdrawn.
IRS Lien Appeal
Another option taxpayers may choose to resolve their liens is through the tax resolution appeals process. This option may only be utilized if taxpayers meet at least one of the following requirements:
- - The tax debt has been fully paid off.
- - The 10-year statute of limitations on the tax liability has expired.
- - The taxpayer sent full payment for the assessed debt.
- - The tax lien was inaccurately filed, and the IRS did not follow the correct process.
- - The Internal Revenue Service (IRS) did not allow the taxpayer to challenge the assessed amount.
- - The taxpayer was bankrupt when the lien was filed.
- - The taxpayer's spouse is at fault for the lien.
- - The taxpayer wishes to apply for an IRS Fresh Start program to resolve the debt.
IRS Lien Release
Qualified taxpayers may be able to have their liens released through the IRS Fresh Start Program. The Fresh Start program offers a variety of payment plans for qualified taxpayers, including the Offer In Compromise, which allows the taxpayer to pay a smaller amount than what is actually owed. Through payment plans such as the Offer In Compromise, taxpayers may be able to have their liens released.
How Lifeback Tax Can Release Tax Liens
It can be daunting to receive notice of a federal tax lien. In order to successfully negotiate with the Internal Revenue Service (IRS), individuals and businesses facing a tax lien should immediately contact a federally licensed tax professional such as an Enrolled Agent (EA), Certified Public Accountant (CPA) or tax attorney.
At Lifeback Tax, our team of experts have over 25 years of combined experience in the tax resolution industry! We have obtained countless federal tax lien releases and withdrawals for our qualified clients. Instead of trying to settle with the IRS on your own, let the LifeBack team fight for you. Our team of tax resolution specialists have rigorously studied the IRS tax code in order to determine the best structured resolution for our clients. You can finally have peace of mind once you retain our firm.
IRS Tax Lien FAQs
You can verify the existence of a lien with the IRS’ Centralized Lien Operation. Their telephone number is 800-913-6050.
The IRS files a Notice of Federal Tax Lien to give public notice of the lien to creditors. The Notice of Federal Tax Lien is filed with local and/or state authorities or Secretary of State Office.
After the IRS files a lien, the lien may be released after the debt is paid, the payment of debt is guaranteed by a bond, you enter into an offer of compromise, or the collections period has ended.
Yes, it is possible to purchase a home even with an IRS lien. However, the existence of a lien may hurt your credit score and loan prospects.
Yes, the IRS will release a lien when:
• the debt is paid
• the payment of debt is guaranteed by a bond
• payment terms have been met in an Offer in Compromise
• the statute of limitations has been reached.
Yes, liens are generally discoverable information by the three major credit bureaus.
Liens are likely to have a negative impact on your credit score.
The statute of limitations on an IRS tax lien is 10 years.