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Federal Tax Liens and You

January 10, 2013

Below is some helpful information about federal tax liens, presented by Tax Defense Network’s Senior Licensed Tax Professional Jonathan Bochese.

What is a federal tax lien?
A federal tax lien is merely a piece of paper filed with the county clerk. The lien is intended to provide public notice of the debt you owe. The public notice is intended to protect the federal government’s position against certain items you may own.

Why does IRS want to file one against me?
The government files the lien to protect their interest in the past due tax balances. As long as you cannot fully pay your balance, the IRS can file a lien at any time.

How will a federal tax lien affect me?
A federal tax lien will affect each person differently.

Does the lien affect my credit score?
The federal tax lien is a public document, and although IRS does not report the lien directly to credit bureaus, it is likely that one of their investigators will eventually find and report the lien. Your credit score may be affected by the lien once it is reported to the credit bureaus, which may affect your ability to get credit.

Does the lien affect my home?
The lien will “attach” to real property that you own in the county where the lien is filed, including your home if you own it. You will be required to satisfy or address the lien before you can sell or refinance your home. Usually, the tax lien is paid out of the sales proceeds at the time of closing.

your home is being sold for less than the lien amount, or if you have a mortgage and don’t have enough equity to satisfy both the mortgage and lien, you can request the IRS discharge the lien to allow for the completion of the sale.

If you are trying to refinance, you can request that the lien be made secondary to a potential lending institution’s lien to allow for the refinance or restructuring of a mortgage.

How else will the lien affect me?
Because the federal tax lien is a public document, it is accessible to other companies who may try to use the information to solicit their services. Usually, the solicitations are sent by advertising firms and not from legal service providers.

How can I avoid a lien?
Liens can be avoided by paying off your tax balance in full. Sometimes, a lien can be avoided even if you cannot immediately fully pay your account – depending on the total balance you owe and the specific history of your account. You should discuss these options with your Tax Analyst if you have not already done so.

What is the difference between a lien and a levy?
A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your taxes. A levy actually takes your property to pay the tax debt. The lien will not remove money from your bank or your paycheck, and will not affect your ability to use your bank account.

Tax Defense Network is your preferred tax resolution firm. Our team of licensed tax professionals, ex-IRS agents, enrolled agents, and tax professionals are your source for individual and small business help with federal tax liens. Contact us today for a free consultation.

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