Tax Lien: How it Works and What You Can Do.

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If you fail to pay your taxes on time, the government can legally step in and file a tax lien against your property.

A tax lien happens when the IRS assesses your tax delinquency and sends a bill for your due balance when your tax payments are past due.

Receive a tax lien letter in the mail? Do not ignore it.

The government wants to collect that money and can do so by taking action against your current property, home, automobiles, or other financial assets.

Address and remove tax liens before they become a more serious problem–such as tax levies. 

Keep reading to learn how tax liens work and how to protect your assets.

Notice of Federal Tax Lien (NFTL)

Failure to pay your taxes will result in the issuance of a Notice of Federal Tax Lien (NFTL).

The IRS does not send out tax liens to clog up your mailbox. If one ends up in your hands with your name on it – take it seriously.

An NFTL is an official notice sent out by the IRS. This document outlines what the IRS requires to recoup the unpaid tax owed them, along with any potential interest accrued and penalties.

Once a tax lien is issued in your name, the IRS can only remove it after all payments have been made or after a period of 10 years has passed

An example of an NFTL can be seen here.

How does an IRS Tax Lien affect me?

While a tax lien might look like a simple piece of paper with a warning to pay your taxes, its creation triggers a chain of events that can seriously affect your finances.

An unresolved tax lien can have the following consequences:

  • Limit your ability to get new credit (credit cards/cars/house loans).
  • Negatively affect your credit score.
  • Attach to any personal property, business property, or business accounts receivable. 
  • Continue to exist after applying for bankruptcy.

With a tax lien, your unpaid taxes are on public display for all to see. 

Creditors can see that you owe money to the government, there is a possibility that your lien can be sold off to private collection agencies.

If these parties own your unpaid taxes, they now have the right to collect on it.

When third parties get involved and buy out your lien, it can lead to additional negative consequences like aggressive collection agency tactics.

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What to do after receiving a Tax Lien Notice

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After you receive a tax lien notice, you have a few options to help protect you and your assets.

First, ensure the NFTL has the correct information and that the unpaid back taxes are not something you already paid. Mistakes are rare, but they can happen.

Confirm that the amount is unpaid and truly yours. If it is, can you afford to pay it immediately to remove the tax lien? If not, there are a few steps you can take to get more answers and get your tax lien removed:

  • Consider a payment plan with the IRS
  • Ask if you qualify for an offer in compromise
  • File a collections due process hearing

Still unsure about your options?

Consult our team at Total Tax for additional help. We know this process in and out and can help you determine the next best step to approach your tax lien.

News alert:

On February 9, 2022, the IRS announced it would suspend automated notices and letters – including intent to levy notices – while it worked through a backlog of unprocessed returns.

As of the date of this article, there has been no formal announcement of when the notices will resume, but the agency does warn taxpayers to resolve unpaid taxes quickly because interest and penalties will continue to grow.

How to get a Tax Lien removed (in 3 steps)

Once you have all the correct paperwork and the finances to pay off the lien, removing a lien is simple. With Total Tax, the process is hassle-free.

All you need is the right patience, paperwork, and payment, and you can get your lien removed.

You can do this, and we can help.

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Chat with Professional Tax Attorneys:

Contact us today for a free consultation. Let us help you get the tax relief you need and deserve.

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Eduardo Santaolalla (Tax Attorney), Steve Fuqua (Enrolled Agent), Mark Walstrom (Enrolled Agent), Leah Mclaughlin (Enrolled Agent)

Recent tax settlement success stories.

Below are a few examples of recent tax settlements won in the last year. 

  1. California State liability of $4,893,000. Settlement amount: $1,000.
  2. IRS Federal liability of $82,100. Settlement amount: $40.
  3. IRS Federal liability of $98,312. Reduce to Refund: $2,940.
  4. IRS Federal liability of $70,040. Reduced to $0.
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