What are IRS tax liens?
Ignoring your IRS debt won’t make it go away; it only makes it more difficult to refund and return in good standing with the IRS. We know that any amount of tax debt can seem overwhelming, which is why our experienced tax attorneys are here to help!
Let’s look at what tax liens are, how long they can affect you, and ways to remove them.
What is an IRS tax lien?
An IRS tax lien is a legal claim against the assets of an individual or business indebted to the government. Tax liens are usually issued against a taxpayer’s home or vehicle. The IRS has a property claim on the specified property until your tax bill is paid.
Failure to repay your debt and tax penalties from the IRS can lead to the seizure of personal property and financial assets, including property acquired after the lien was issued. Tax liens are often reserved for a tax debt of at least $10,000.
Having your prized possessions in limbo is just one of the consequences of an IRS tax lien. Applying for credit or financing from other institutions becomes difficult once the government files a lien against you; a tax lien will not lower your credit score, but it is public information for anyone to see.
When does the IRS file a tax lien?
The IRS gives taxpayers fair warning before resorting to a tax lien. Once a lien is in place, it’s difficult to remove, so it’s important to respond quickly to tax debt notices and avoid the worst-case scenario.
Here is a typical IRS tax lien schedule:
- The IRS will notify you that you owe via a Notice of Deficiency (also called a 90-day letter), which gives you 90 days to pay
- The IRS will automatically create a Notice of Federal Tax Lien if you fail or refuse to pay by the deadline.
- If your debt is $10,000 or morethe IRS will file a tax lien as soon as 10 days after receiving the notice of lien
The Notice of Federal Tax Lien becomes a public record to notify other creditors that the IRS has access to your assets and property first if you cannot repay.
If your total debt is less than $10,000, the IRS can still issue a tax lien if the need for recovery is urgent. The IRS can act quickly in these situations if it doubts you can pay what you owe due to bankruptcy or if it finds that you are already liquidating your assets.
How long does an IRS tax lien last?
An IRS tax lien expires with your tax debt; the IRS can only continue collection efforts within the statute of limitations. The clock for tax debt starts on the date of your original tax bill from the IRS, and the statute of limitations is usually 10 years.
However, there are several reasons why the collection status expiration date (CSED) may be extended:
- Live abroad for 6 months
- Military postponement
- Collection Due Process Hearing (CDP)
- Filing a Petition in the United States Tax Court
- Getting Innocent Spouse Relief
- A taxpayer assistance order
- Filing of an offer in compromise (the clock is paused while the request is processed)
You may be able to avoid the taxman momentarily, but the debt will catch up with you in the long run. After filing a tax lien, if your debt remains unpaid, the IRS may up the ante and move forward with a tax levy.
It is always best to anticipate your tax obligations and cooperate with the IRS. Our experienced team can take care of the whole process for you! Consult a tax attorney to help you save time and money.
How do you remove an IRS tax lien?
The easiest way to remove an IRS tax lien is to pay it. Period. However, the IRS will also release a tax lien if it was filed in error or if the outstanding balance was satisfied through a successful Offer in Compromise.
Besides paying in full, the 2 most common ways to remove an IRS tax lien are withdrawal and release. Lien subordination is another option that will not remove the lien, but may provide temporary relief.
Removing an IRS Tax Lien
The IRS will remove a tax lien if there is a mistake, such as targeting the wrong taxpayer for the debt. If you find yourself in this situation, the lien can be erased from your file as if it had never been filed. You should contact the IRS immediately to allow them to review your account and verify that an error has been made.
Release of an IRS tax lien
The IRS will automatically release tax liens within 30 days of receiving full payment of the debt owing. The lien is removed from the public folder within 30 days of posting. A specific type of installment agreement can also remove the lien if certain conditions are met. Learn more from our experienced tax lawyers. The IRS may also remove a lien if it believes it can speed up the collection process or if it is in the best interests of both parties, such as if the taxpayer is bankrupt.
Having an IRS tax lien can make it difficult to find a loan or refinance. In some cases, the IRS may grant you a certificate of subordination, allowing other creditors to get ahead of the IRS in priority. This provides the opportunity to refinance your home or other property, which can free up money to help pay off tax debt.
However, this does not remove the IRS tax lien or your obligation to pay.
Get help from an experienced tax lawyer
Dealing with years of back taxes and debt can be stressful, but it’s a problem that can be solved. The IRS offers eligible taxpayers a number of solutions to reduce tax debt and get back in good standing.