December 11, 2012

There are two four-letter-words in IRS parlance that can mean big trouble for a taxpayer who has unpaid tax debt. One of them is a tax levy, the other is a property tax lien.

What is a Tax Lien?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. – IRS.gov

Not interchangeable with a levy, a federal tax lien is a document that alerts the general public that a taxpayer has unpaid tax debt.  It attaches to all of your property, both real and personal, but the IRS now becomes a not-so-silent partner if you try to dispose of it before the IRS gets its cut. A lien essentially protects the government’s ability to collect money.

The document filing occurs after the IRS:

  • Has determined that you actually owe the tax
  • Has sent you a Notice and Demand for Payment
  • Received no response to the Notice, or otherwise determined that you refused or neglected to pay the tax debt

A tax lien sticks like glue to all your assets — your home, your car, the cash value of your insurance policy — everything. Also, your ability to get more credit could be significantly hampered when creditors learn that you and the IRS are involved in a lien. Have a business with pending accounts receivable? The tax lien will attach to those as well.

How to Avoid a Property Tax Lien with Tax Resolution

Pay your taxes in full and on time! File your taxes before the IRS has the time, or the reason, to send an IRS rep out to file a tax lien against you at your local courthouse.

Easier said than done, right? Well, there are a few ways you can prevent a tax lien if you can’t pay your taxes on time.

  • DO NOT ignore any notices or letters the IRS sends.
  • DO respond quickly to any notices, either by phone, mail or fax. Wait too long and the IRS might feel you are trying to avoid paying the debt, and file a lien.
  • DO contact the IRS immediately if you believe the tax lien was filed in error.
  • DO arrange for an extension if you cannot pay your tax debt by April 15th.
  • DO set up an installment agreement with the IRS if you cannot pay the debt in one full payment. If the IRS knows that you have negotiated an installment plan, they will not file a lien against you. If you fail to pay on schedule, you’ll lose your credibility with the IRS and they’ll file a lien against you immediately.
  • DO contact a professional tax attorney for tax resolution if you are wary of working directly with the IRS. They can explain your options, your next steps, and help you set up any payment plans or extensions with the IRS. They can also help you file an appeal if a lien was filed erroneously.

Optima Tax Relief can help. If you owe IRS tax debt, have already received a Notice of Federal Tax Lien, or feel that a lien was filed against you wrongly, our tax attorneys will work to have your tax issues resolved once and for all.