A federal tax lien is essentially the IRS calling "dibs" on your property. It means they have a legal right to your property until you settle your debt with them. This is not limited to people who own homes. That is a common misconception that I see among taxpayers.
A federal tax lien gives the IRS a legal claim to all a taxpayer's property. This includes but is not limited to:
A Home
Bank accounts
Securities
Vehicles
It even attaches to assets that you may receive in the future. If you are a business owner it also attaches to all your business property. This includes your accounts receivable. Once the IRS files the tax lien they have the right to seize this property through a tax levy.
But how do you get a tax lien? It's not the IRS' first course of action when a taxpayer owes them. There is a process that the IRS must follow first.
Once you file your tax return, if there is a balance due the IRS must assess this. When they do this it goes on your account transcript as a balance due. Then the IRS will assess an additional penalty and interest as well. You can find this information by pulling your account transcript to see what they are saying you owe.
Then the IRS will send you a bill, known as a CP14. This is a Notice and Demand for Payment. If you neglect or refuse to fully pay the debt in time the IRS can file the tax lien. A Notice of Federal Tax Lien is a public document that the IRS files with your county clerk's office. Some of these are available to see online, while others are available to see for a small fee.
This notice puts other creditors on notice that you owe the IRS. The amount that you owe attached to the tax lien is also on the notice. The notice will pop up if you try to buy or sell a home. It doesn't directly affect your credit by showing up on your credit report. However, it can still affect it if you cannot receive financing due to the lien.
If you have been receiving mail about your tax debt from people other than the IRS they likely pulled your information from the tax lien list. Do not let them bully you into using them to get your tax matter resolved. Take a deep breath, and do your research to find someone you can trust to help you with your tax matter if you cannot pay the bill in full.
Even if the IRS has not filed a Notice of Federal Tax Lien there is still a lien implied. We call this a silent tax lien. That means you could still receive a CP504, Intent to Levy from the IRS. So don't let fear make you freeze. You need to handle the notice before the situation gets worse and the IRS is managing your money for you.
To avoid the federal tax lien altogether you can pay the tax debt in full. This is also the easiest way to get rid of the tax debt. The IRS will release the lien within 30 days after you have paid your debt. But that scenario is not realistic for everybody, so it may not be realistic for you.
There are 3 other options for getting rid of a tax lien. They are:
Discharge of Property - this removes the lien from a specific property. An example of this would be so you could buy or sell a home.
Subordination - does not remove the lien. It allows other creditors to take priority over the IRS. This can help make it easier for you to get a loan or mortgage.
Withdrawal - removes the public Notice of Federal Tax Lien, but you are still liable for the amount.
If you feel that the IRS issued a tax lien wrongfully you do have the right to appeal. You can do this by contacting the Office of Appeals. To resolve basic issues, confirm the lien, or get a payoff amount you can call Centralized Lien Operation. This is also the number you can call to release a lien. The number is 1-800-913-6050.
If the thought of this feels overwhelming you do not have to do it alone. At Bowens Tax Solutions we specialize in helping taxpayers who owe the IRS and can't afford to pay them today. We'd be happy to see if you're a good fit to work with your office. You can book a call with us at www.Bowenstaxsolutions.com.
Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn can fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator she empowers taxpayers to make educated decisions about their tax situation.
When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.