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What Should You Do When the IRS Files a Notice of a Federal Tax Lien Against You?

What Should You Do When the IRS Files a Notice of a Federal Tax Lien Against You?

By on Sep 9, 2019 in IRS | 0 comments

Getting a notice of a federal tax lien filed against you could mean that you won’t receive the proceeds from any property sales you make. When a lien is in effect against your house or another piece of property, the IRS gets paid out of the sales proceeds before you receive any money. If there’s nothing left when the IRS is done taking its chunk, then you literally get nothing.

Worst of all, liens are always a matter of public record when they’re filed. The lien records the full amount owed to the IRS, which means you won’t be able to hide from it. These documents are designed to protect the government’s ability to collect a tax when it seems doubtful that they otherwise would be able to.

While this is a scary situation, you shouldn’t get all worked up about it. Take a deep breath and consider the following tips from the experts at Success Tax Relief.

Getting Rid of a Lien Once Its Filed

Each time the IRS files a lien, they put a taxpayer’s balance due flat down on the books by assessing their liability. They then respond by sending out a bill called a Notice & Demand for Payment document. Those who fail to pay this debt have a lien officially levied against them.

As long as you make sure to pay these bills or work with the IRS on an alternative, then you shouldn’t have too much difficulty avoiding a lien. This isn’t too much help if you’re already in the hole, however.

Paying your tax debt in full will force the IRS to release the lien within 30 days of when you finish paying it off. If you can afford to do it, then paying the bill outright can completely eliminate the problem. IRS agents are never allowed to keep a lien against those who have demonstrated that they’ve done so.

Unfortunately, this may not be an option depending on your specific financial situation and how much tax you owe. Other options do exist for reducing or eliminating a lien, and you may want to explore them if you find yourself in this trap.

Discharge of Property

Some taxpayers are eligible to receive a discharge, which removes the lien from a specific property. Like with most things related to the IRS, the eligibility requirements are rather exact. However, you should take a look at this if you owe a significant amount of money and are planning on refinancing or selling a property with the hopes of improving your long-term financial outlook. Doing so could eventually reduce your monthly bills, which in turn can help you save enough money to pay the IRS in full.

Withdrawal

Since you’re still liable for the amount due even after getting an IRS withdrawal, this option is a bit easier to take. Withdrawals remove the public notice and assures a taxpayer that the IRS isn’t competing with any other creditors for their property. Due to the institution of the Fresh Start Initiative, two new withdrawal options are also available.

In order to qualify, you’ll need to be in compliance with all relevant filing regulations for at least the past three years. If you’ve been sending in at least some form of tax return, then this should usually suffice. You also need to be current on your estimated payments or federal tax deposits.

Subordination

Taxpayers who can’t take advantage of any of these options can still request subordination of the lien. This doesn’t actually remove it, but it does allow other creditors to move in front of the IRS’ claims. This makes it easier to apply for a loan or mortgage. Once again, this is an excellent option if you’re having problems refinancing your home. Getting a new loan or reorganizing your mortgage can be a great way to reduce your other financial obligations and therefore get on track to eventually paying off any debt you may have incurred over time.

Getting Advice When Dealing with a Tax Lien

Considering that a lien can make it nearly impossible to get equity out of your home or other property that you might own, it’s important that you tread carefully as you work to correct the situation. Success Tax Relief has worked with numerous other taxpayers just like you and can work to improve the situation no matter how deep it might look at the moment. Contact us online today and we’ll put experienced relief workers on your side to help you get out of tax debt once and for all.

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