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IRS Tax Liens: Your Questions Answered

When you fail to pay your taxes, the government may place a tax lien against your home, other real estate, personal property, and other financial assets – both present and future. Many people, however, are unsure of how liens work, so we thought it might be beneficial to do a little Q & A session. Here are the answers to some of the most common questions we receive.

Is a Tax Lien and Tax Levy The Same Thing?

People often mistakenly assume that a tax lien and tax levy are the same thing. They are not. A tax lien is a claim to your property, but you still maintain possession of it. A tax levy, on the other hand, allows the government to seize your property and sell it to cover your tax debt.

How Will I Know If The IRS Has a Lien Against My Property?

If you’re asking this question, you probably owe the IRS back taxes. This means that you should have received multiple notices/letters requesting payment. The IRS will file a Notice of Federal Tax Lien, however, if you ignore these requests for payment. This is a public document that alerts creditors to the government’s right to your property.

If you moved since filing your taxes, you may have missed the “Notice and Demand for Payment” letters. This, unfortunately, will not prevent the IRS from moving forward with a tax lien, but there are a few other ways to determine if there is a lien against your property:

  1. Call the IRS Centralized Lien Unit at 800-913-6050.
  2. Visit your county’s Clerk of Courts website and conduct a title search.
  3. Contact a tax professional.

A tax professional can not only find out if there is a lien in place, but also work with you to find affordable solutions for taking care of your tax debt.

Will a Tax Lien Affect My Credit Rating?

Technically, no. Tax liens are no longer included on your credit report, but they are part of public record. Although they do not impact your credit score directly, they can make it difficult to secure mortgages and other types of loans, or rent a home. A tax lien may also prevent you from obtaining certain jobs that require higher levels of security clearance, as well.

What Are The Best Ways to Avoid an IRS Lien?

The best way to avoid an IRS tax lien is to pay your federal taxes in full and on time. If you are unable to pay your taxes in full, you’ll need to communicate with the IRS and come up with a plan to address your tax debt.

One option is to request a filing extension. This give you an additional six (6) months to file. Although interest and penalties will accrue, the IRS won’t file a lien during this period. You can also request a payment extension for up to 120 days.

Another option is to enter into a direct debit payment plan or streamlined installment agreement. If you qualify and owe less than $50,000 ($25,000 for businesses), the IRS will typically not file a lien.

How Do I Remove an IRS Lien?

Once a tax lien is in place, it will generally stay there until you pay the tax debt in full or the statute of limitations runs out. Under certain circumstances, however, the IRS may release, withdraw, or discharge a lien.

A release of a federal tax lien means that the IRS has cleared both the lien for your tax debt and the public notice. This generally happens when one of the following occurs:

  • You paid your tax debt in full.
  • Payment of your taxes is guaranteed by a bond.
  • The IRS accepted your Offer in Compromise, and you met the payment terms.
  • The statute of limitations for collecting the debt has expired.

A withdrawal, on the other hand, is like the lien never existed. This is done for only a few reasons and rarely occurs. If you owe less than $25,000 and enter into a direct debit payment plan for 72 months, however, you may request a lien withdrawal after the third payment clears.

You may also be able to remove specific property from a tax lien through a discharge. The IRS may grant a discharge when:

  • The property in question is worthless.
  • You agree to sell the property and place the proceeds in escrow.
  • A third party provides a bond or deposit equal to the IRS lien interest.

A discharge may also be granted if you pay an amount equal to the interest in the property.

Need Help With an IRS Tax Lien?

If you’re behind on paying your taxes and worried that an IRS tax lien is imminent, get help immediately. At Tax Defense Network, our experienced tax professionals can help you find an affordable solution for handling your tax debt and help you avoid potential liens. In certain situations, we may also be able to assist with having your lien withdrawn or released. Call 833-803-4222 to schedule a free consultation and explore your options today!