From payroll taxes to income taxes, capital gains taxes to estate taxes and beyond, there are numerous tax obligations that a taxpayer may find himself or herself required to pay – particularly if he or she operates a business, owns a home, or holds substantial assets. Unfortunately for the unlucky taxpayer who falls behind on his or her federal or state tax obligations, the Internal Revenue Service (IRS) and the FTB, CDTFA and EDD can take aggressive measures to enforce and collect a delinquent tax debt, up to and including the imposition of a tax lien. The bad news is that a tax lien is a serious financial issue which may lower your credit score, harm your small business, and potentially even complicate the sale of your home, depending on how efficiently the lien is addressed. The good news is that, with skilled and strategic handling by an experienced tax lien attorney, it may be possible to have the lien removed or withdrawn to avoid these consequences. Read on to learn more about how tax liens work, why and when liens are applied, and perhaps most importantly, what steps you can take to get rid of a tax lien on your real property or other assets.
First, it is important to distinguish between a tax lien and a tax levy. If you are looking for assistance with a tax levy, such as the release of a wage levy, our IRS tax levy attorneys are ready to provide you with a reduced-rate consultation. Otherwise, continue reading for a discussion of tax liens.
Unlike a levy, which is the actual seizure of funds or property to satisfy an unpaid debt, a lien is merely a legal claim against your property, the purpose of which is to secure the taxing authorities’ interest in your property, such as your home or personal vehicle. Liens are utilized when a taxpayer fails to pay tax debts, such as unpaid federal income tax debts, which have been assessed.
The loss of personal and real property is not the only matter that should concern a taxpayer if the IRS seeks a tax lien against them. A tax lien would place the IRS ahead of all other creditors of the taxpayer. As a result, a taxpayer may have difficulty securing credit from a financial institution.
Additionally, tax liens are not reserved solely as penalties for individual taxpayers. A tax lien could also be attached to all property owned by a business, including accounts receivable. If the IRS has to proceed with a tax levy because the company did not pay their taxes, this could cause the dissolution of the company as they likely would need all property seized by the IRS to operate.
Note that a tax lien also applies to future assets that are acquired after a tax lien has been issued by the IRS. For instance, if a person purchases a home after the IRS issues a tax lien, the house would be subject to the lien.
By way of example, three criteria must be satisfied before the IRS may create a tax lien:
Thousands of debt resolution companies buy data base listings of all new tax liens and this explains the deluge of junk mail that invariably follows the posting of a tax lien. Unfortunately, many debt resolution companies are disreputable and can often do more harm than good.
While a lien is perhaps less extreme than a levy, that does not mean a federal tax lien should be taken lightly. On the contrary, it is essential to respond swiftly and aggressively with support from a knowledgeable tax attorney, who can help you navigate the process with maximum efficiency – and minimum financial damage.
The simplest and most straightforward way to eliminate a federal tax lien is, perhaps unsurprisingly, to pay the tax debt in full, which should result in a release of the lien within 30 days of payment. However, if you owe a substantial amount, paying off the debt right away may not be financially feasible. Alternately, you may disagree with the reasoning that forms the basis of the lien. Fortunately, there are steps you can take should you find yourself in such a scenario, including the following:
There is also another option available for the withdrawal of a federal tax lien if the taxpayer has changed their installment plan to pay off their tax debt to a “direct debit installment agreement.” Under these circumstances, a tax lien can be withdrawn if the following is true:
Bankruptcy is not an effective way to avoid a tax lien. After filing for bankruptcy, there is a chance that the tax lien and tax debt owed to the IRS will not be discharged at the conclusion of the proceedings.
When a taxpayer decides to ignore their obligations to pay their tax debt, the IRS will eventually perform a tax levy. A tax levy will legally seize all property named in the tax lien necessary to pay off the taxpayer’s debt. Receiving a “Notice of Intent to Levy” or a “Notice of Your Right to a Hearing” from the IRS is a clear signal that you should seek legal representation to discuss how you could get a tax levy released. Do not let the IRS seize your property for a matter that could be resolved with negotiation.
Unpaid tax debts can have serious ramifications for your home, your vehicle, your business, your personal funds, your retirement savings, your personal property, and your overall financial health and stability. It is imperative to respond quickly and strategically if the IRS or a state tax agency, such as the California Franchise Tax Board, is attempting to utilize a lien or levy to collect an unpaid tax debt. For a reduced-rate consultation concerning a federal tax lien, IRS tax levy, tax-motivated bankruptcy, or other options for obtaining tax relief and resolution, contact the Tax Law Office of David W. Klasing online, or call our law offices at (800) 681-1295 today for assistance.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.
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