There may come a time when you, or your business, are unable to pay taxes owed to the Internal Revenue Service (IRS). When this happens, there are a number of ways for the IRS to respond. One of the most common IRS actions is a federal tax lien. An IRS tax lien is filed with local county governments and allows the IRS to claim the rights to the defaulter’s assets, tangible and intangible, in order to collect an unpaid tax. These assets include, but are not limited to, real estate, bank accounts, and vehicles. A federal tax lien also attaches to all presently-owned and future assets. (Note: A lien, which identifies the government’s interest in your property when a tax debt remains unpaid, is not synonymous with a levy, which actually allows your property to be seized to pay the debt.) After sending Letter 3172, Notice of Federal Tax Lien and Right to a Hearing, which requires the taxpayer to give public notice to all creditors, the federal tax lien will remain a matter of public record until the debt is paid in full. The tax lien goes into effect 10 days after the notice is issued.
Once a federal tax lien is filed, the taxpayer’s ability to obtain and maintain credit is diminished. It can affect credit reports, the ability to sign a lease, the ability to obtain new employment, the sale of any property, or a bankruptcy proceeding. Unless handled with the IRS, bankruptcy does not automatically release the taxpayer from lien payments. As with all tax issues, the best way to handle a tax-related penalty, such as a federal tax lien, is to pay your debt in full. When that isn’t possible, the next best avenue to explore is working with the IRS to set up an installment agreement with government requirements, like a guaranteed or streamlined agreement. A guaranteed agreement can be qualified for if the taxpayer’s outstanding tax balance is $10,000 or less. A streamlined agreement is used when the tax owed is between $10,000 and $25,000. (If more than $25,000 is owed, a streamlined agreement can still in instated if the taxpayer is able to pay his or her balance down to the $25,000 max cap.)
While it is possible to have a federal lien removed when an installment agreement has been approved and implemented, the two definitive ways to have a lien removed is through withdrawal and release. Withdrawal of a lien can happen if it was placed on property in error or if the 10-year statute of limitations has been exhausted.
Not all collection tactics are “aggressive”. The efforts taken by the IRS can take on, both, the bounty hunter and helping hand tactics. The latter of the two is often accomplished through the IRS presenting the tax debtor with deals, such as installment payment agreements, which require the CSED to be extended.
A release, on the other hand, happens once a tax debt has been satisfied. All federal tax liens are released 30 days after full payment of an outstanding tax balance has been paid to the IRS.
You always have an option to contact the IRS directly and request a lien removal, but having the advice of a professional team is an even better tactic when dealing with something as complex as tax liens. If you have received a notice of federal tax liens or have questions about tax lien procedure, let the expertise of Tax Help Network guide you to getting your life back on track.