A Federal tax lien means that the IRS has attached a claim of financial interest to your property. What this means is that the IRS now has first shot at any monies that may be received from the sale of said property. It can be a car, a home, or a piece of land. Anything you own that has a financial value can have a lien put on it.
How the IRS Initiates a Lien
When, not if, the IRS finds that money is owed, they will send out a notice as well as a demand for payment. It will be stated how much tax you owe. If you ignore or do not pay the amount in full within ten days after notification, a lien will be initiated. Once it's filed, all of your creditors will be notified that the IRS has a claim against all items of property. The lien will also be applied to any property obtained after it was filed.
In effect, the IRS is telling your creditors that a Federal tax lien was filed and that the government now has priority over all other claims. This applies to sale of the property and bankruptcy proceedings. It can also be attached to a business' account receivables.
Removing a Lien
There are options available to have a lien lifted or even avoided. In order to do this, you must work quickly with the IRS. Delaying only makes things worse for yourself.
- A lien will be lifted 30 days after the amount has been paid in full.
- Arrange a payment plan. The lien will not be lifted until all taxes, fines and penalties are paid off, but it offers a light at the end of the tunnel.
- Sell the property with the lien. This is a most drastic measure, but if you were already planning on selling your home, you can satisfy the debt at the time of sale.
- Appealing the lien. You have the right to appeal the lien on the sixth day after receiving notice. The downside is, even if you win the appeal, the filing will appear on your credit record with negative effect.
Hiring a Tax Attorney
Federal tax liens need to be taken seriously. It's better to hire a tax attorney with experience in tax liens than to try do to it on your own. They have the knowledge of how to work with the IRS and obtain the best possible solution for your situation.
