Merely because you owe taxes does not mean that the IRS will criminally prosecute you. You can negotiate a federal tax lien with the IRS. The IRS is always ready to work with you if you approach them with good faith. When you owe taxes, you have many options legally available to you. The first one is to pay off the taxes if you have the resources to do so. Make full payment and you will be out of the defaulter list. But then not everyone can afford to make full payment in one go.
Tax Lien
A federal tax lien is a method of creating a legal interest in a property if back taxes are outstanding. The IRS will be entitled to all or part of the equity in the property when it is sold. Before a tax lien is issued, the IRS will assess your liability and issue a Notice and Demand for payment. Once you receive the Notice and Demand for Payment, you must pay the back taxes within 10 days. If you fail to do so, a tax lien will be issued. Once the IRS files a Notice of Federal Tax Lien, the IRS will have preference in the equity in the property over other creditors.
Negotiation
If the IRS has issued a lien on your property, you can negotiate with the IRS. While negotiating you have many options. Sometimes the IRS issues a tax lien without considering all legal aspects. In cases where there is a legal impediment which prohibits the issue of the lien, you can bring this to the notice of the IRS. Legal impediments include:
- Statute of limitation for the collection of the tax debt has expired before the lien was issued
- The lien was issued when you have filed for bankruptcy and you are protected by the automatic stay.
If there are procedural errors or you have already paid the taxes, you can inform the IRS accordingly and provide evidence of the same.
Payment Options
If the lien was rightly issued, you can still negotiate a settlement with the IRS. You can make an offer in compromise wherein you offer to pay less than total outstanding back taxes. The IRS is authorized to accept less than the full amount if there is doubt about the tax liability or its collection or in case of exceptional circumstances – the lien is causing you considerable financial hardship thereby making collection difficult. You can also offer to pay your liability in installments by requesting an installment agreement for part or entire liability. Generally you will be required to make the payment within 60 months.
Getting Legal Help
A federal tax lien is serious. Consult with an experienced tax attorney. The tax attorney can negotiate with the IRS on your behalf.
