What do you do if you owe taxes and a federal tax lien is filed against you?
Technically, the IRS does not need to file anything for a tax lien if you owe money. The statutory lien arises automatically by statute when money is owed and the billing notice is not paid. However, because third-party lenders and creditors would not know the tax lien exists, the IRS will often file a Notice of Federal Tax Lien (“NFTL”) to put third parties on alert that the taxpayer owes the IRS money and that the IRS has an interest in their assets.
When the government places a lien on an individual’s assets, it becomes a public record, which can significantly impact their credit score and ability to receive loans or purchase items like homes or cars. Some states also require the release of liens before certain transactions can take place, such as the sale of real estate.
A tax lien will remain in place until the debt is paid in full, the tax debt is compromised, or the ten-year collection statute expires.
So what are your options?
You have several options for dealing with the IRS Tax Lien, not the least of which is to pay the total debt if you can. Assuming you are not able to pay the tax debt in full, the options include:
1. Withdrawal of the NFTL. The IRS will agree to withdraw the NFTL if the taxpayer is in a direct-debit installment agreement, has made at least three monthly payments, and the balance owed is under $25,000.
2. Discharging an asset out from under the tax lien. The NFTL is meant to protect the government’s interest in the assets. If you can sell an asset and the IRS obtains the equity (limited to what it is owed), then it will agree to allow the property to be sold.
3. Subordinating its lien to a third party. The IRS will agree to subordinate its tax lien to a third party if the IRS will either obtain cash from the third party loan or if your ability to pay the IRS increases because of the new loan (like a refinance of a mortgage).
You have options if you currently have a federal tax lien against you. Contact me at 504-680-6057 or ian@semmlaw.com.
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