I manage a tax practice in Richardson, TX, and one of the major issues that taxpayers come to me with are problems related to IRS Liens. Taxpayers often don’t understand the process, how a Tax Lien impacts them, and what they can do to avoid one or remove one. This is the first in several articles that I will write on the lien process. In the following articles, I will dig deeper into the process as well as what to do if the IRS places a lien on your assets.
The Impact of the Tax Lien
An IRS lien is a very powerful tool for the IRS. It attaches to all property owned or acquired after the lien is issued. For example, if a taxpayer purchases property while under the lien or acquires it in another manner such as inheritance, the lien will attach to those assets as well. However, there is sometimes a misconception that tax liens supersede other liens such as a bank mortgage. That’s not the case. The IRS does not leapfrog other liens that are already in place.
The Types of Liens
The federal tax lien, under Section 6321 of the Internal Revenue Code, arises when a taxpayer, liable to pay any tax, fails to pay the tax after a demand by the government for payment. There are two types of liens –
- The “Silent Lien” – Did you know that if you have owed money to the IRS for more than 10 days, that a lien automatically arises by law, and it is retroactive back to the date of assessment? While it’s automatic, neither the taxpayer nor creditors are notified and taxpayers typically have no idea that this lien exists.
- Notice of Federal Tax Lien (NFTL) – Section 6321 also authorizes the IRS to file an NFTL in favor of the US to protect the government’s interest in the taxpayer’s property if the taxpayer owes $10,000 or more. This is what is painful to the taxpayer and will negatively impact their credit rating and sell assets under the lien,
How Do I Get a Lien Removed?
In general, once a lien is filed by the IRS, it is not easy to remove. Below are some ways in which a lien can be removed. We will go into additional email in one of our upcoming blogs.
- Pay off the debt thru a viable resolution alternative.
- Liens self-release once the 10 year statute expires.
- Set up a direct Installment agreement with a balance of less than $25,000, and after making 3 consecutive payments, a taxpayer may request withdrawal of the lien.
- Appeal options
In the upcoming weeks, we’ll dig deeper into the IRS Lien process. Stay Tuned!
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