The IRS can file a Federal Tax Lien if tax remains unpaid after a demand for payment.
A federal tax lien (FTL) is the government’s legal claim against a taxpayer’s property when he/she neglects or fails to pay a tax debt. It provides notice to the world of the IRS’s interest in the taxpayer’s property. FTLs can complicate disposition of property or negatively impact a taxpayer’s credit score. FTLs encompass all property, including real estate, personal property and financial assets. They can also attach to business property, including accounts receivable. FTLs are public and show up on a taxpayer’s credit report for seven years even if the liability is paid in full. Unless the taxpayer takes action to get rid of the lien, it may be a potential hindrance, especially when attempting to obtain financing from lenders.
We help taxpayers prevent a FTL from being filed or resolve it if it is filed. Once a lien is filed, there are a number of options which may be available to the taxpayer. For example, a “lien release” occurs in situations where the taxpayer fully pays the corresponding tax liability, if the lien is no longer enforceable because the Statute of Limitations on collection has expired or when the IRS accepts an Offer in Compromise that the taxpayer pays in full.
There are also situations where the taxpayer may be selling, refinancing or using property as collateral for a loan that will not pay the tax debt in full. In these situations, a taxpayer needs to apply to the IRS for a “lien discharge” or “lien subordination.” A discharge removes the lien from specific property so that it may transfer to the new owner free of the lien. Subordination also applies to specific property; however, it does not remove the lien, but instead allows other creditors to move ahead of the IRS which may potentially make it easier to obtain a loan or mortgage. Discharge and subordination are only granted if they are in the best interest of the IRS.
“Lien withdrawal” may also be an option for some taxpayers. Withdrawals can be requested if the liabilities have been paid in full, the lien was filed in error or the lien has become unenforceable.
If you would like assistance on addressing a Federal Tax Lien, do not hesitate to reach out to us.