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What to Do If You’re Faced With an IRS Tax Lien

It’s tough to see a positive side to receiving a federal tax lien. The sight of the official IRS envelope among your daily mail may be enough to fill you with dread.

Fortunately, the federal government uses a defined process to file a lien and to resolve one. At each step of the process, you have legal rights. Working with an experienced California tax collections lawyer can help you protect your rights and reach a resolution that works for you.

What is a Tax Lien?

A federal tax lien is a legal claim made against your property by the federal government. A tax lien may be created if the Internal Revenue Service (IRS) has sent you a tax bill that you did not pay in full by the deadline.

The effects a lien may have on you and your property include:

  • Preventing you from selling property. A federal lien may attach to any or all of your existing assets, including real estate, investments, and vehicles.
  • Making it more difficult for you to get credit. A federal tax lien is a public document. This means that not only will you receive a copy, but creditors and other interested parties may see the lien as well. Notice of the lien may also appear on your credit report.
  • Affecting your business. An IRS lien may affect your rights to business property, including accounts receivable.
  • Persisting through bankruptcy.  You may be responsible for your tax debt even after a bankruptcy is complete.

If your tax debt is not paid, or if the lien is not addressed in another way, the IRS can execute a “levy,” in which the government takes some or all of your property and sells it to settle your tax debt.

What Can I Do About the Tax Lien?

While the IRS recommends paying your tax debt in full to end a lien, in some cases this is not the best option. For instance, you may be currently incapable of paying the debt, or the lien may be based on a tax debt that was incorrectly calculated or that you do not owe.

If you receive notice of a federal tax lien:

  • Don’t procrastinate. Dealing with the matter promptly keeps more options available to you.
  • Consider ways to pay any money you owe. The IRS may allow you to make payments on the tax debt or may accept an “Offer in Compromise,” in which you pay part of the outstanding bill. Your lawyer can help you reach an agreement with the IRS.
  • Talk to an attorney about other options. You may be able to take advantage of other options for reducing the impact of a lien. These include selling some property free of the lien, subordinating the lien to other creditors to make it easier to get a loan or mortgage, or applying for the IRS to withdraw the lien. An experienced attorney can explain these options and help you pursue them.

The best way to avoid a lien is to work with the IRS from the start to manage your tax debt. If you’re facing a lien, however, the next best step is to work with a lawyer who can help you protect your rights and your assets.  Contact us today to see what your tax options are.

Posted in: Tax Collections

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