An IRS tax lien is one of the last resort claims by the government when you fail to pay your taxes. Tax liens are every taxpayer’s nightmare since you could lose a lot. The government can seize all your assets, including property and finances. The IRS collected an estimated $120 billion in unpaid returns during the 2019 Fiscal Year. The best way of getting out of a tax lien is by settling your tax debt. However, this may be challenging, especially if you are hit with a huge bill. Fortunately, there are other ways of handling an IRS tax lien that can make repaying the tax debt a little easier. Keep reading to find out how you can get out of this sticky situation.
How an IRS Tax Lien Can Affect You
Tax liens are dreaded for a number of reasons. Many people wrongly assume that an IRS tax lien only goes after real estate property. The truth is that any assets in your name are fair game. Your house, car, and finances can be all be seized if you are dealing with an individual IRS tax lien. The consequences can be even more severe when dealing with a business IRS tax lien against your business assets.
Although IRS tax liens no longer appear on credit reports, it still hurts your creditworthiness. The IRS usually files a public notice alerting creditors that they have a right over your New York property. It can cost you as much as 100 points on your credit score. Unfortunately, even filing for bankruptcy might not get you in the clear.
Jeopardizes Property Sale
IRS tax liens are made public, and anyone can access them. This can be a big problem when you are trying to sell or refinance your home. A title search will alert the buyer of the lien against your property. You will have to contact the IRS and pay your back taxes before you can close.
An IRS Tax Lien Can Result in a Levy
If you fail to act after receiving the IRS tax lien notice, things can and will get a lot worse. The IRS will issue a notice of intent to levy. If you are not willing to settle your owed taxes under the IRS lien, the government can physically seize your property and assets to settle your debt. Whether you are dealing with an individual IRS tax levy or business IRS tax levy, True Resolve Tax Professionals is here to help you avoid this from happening to your family and/or business.
Resolution of an IRS Tax Lien
Now that you understand just how bad an IRS tax lien can be, the more important question is how to get out of it. You only have 10 days after receiving the notice to do something about it; otherwise, it takes effect. This is where our tax resolution services come in.
1. Settle Your Debt
Paying your outstanding tax debt is the easiest way to get out of a tax lien. Just make sure you get in touch with the IRS within the stipulated timeline. For smaller tax debt, it makes more sense to make a lump sum payment. However, if you can’t settle it all at once, you can negotiate for favorable terms. Here are some payment options you should consider
- Installment Plan – You agree that the IRS can make automatic withdrawals from your checking accounts monthly until the debt, interest, and penalties are settled. This is known as an installment agreement. In return, the IRS tax lien is withdrawn.
- Offer in Compromise – If you can prove that you cannot settle your tax debt, the IRS lets you pay less the amount you owe. However, OIC status is not permanent. Your financial condition is reviewed annually.
- Currently Not Collectible – This tax relief is only available for those with financial troubles and can’t afford basic needs. It essentially delays the collection of back taxes.
2. File an Appeal
If you are convinced, the IRS has made a mistake regarding the tax lien, you can appeal. You can do this by contacting the IRS Office of Appeals. An initial meeting can be done face-to-face or by a conference call. A determination is then made after reviewing the facts. If it goes your way, you can be granted a discharge, withdrawal, or subordination. More on these later.
However, the appeal can also decide that the tax lien stands. If you filed the appeal under Collection Due Process, you can take the case to the U.S Tax court. But if the request was handled through the Collection Appeal Program, the determination is final. Ensure you file the appeal within 30 days of receiving a lien notice. You have better chances of winning if you have tax professionals by your side.
3. Apply for Discharge of Property
As earlier mentioned, all property under tax lien cannot be sold without going through the IRS. Applying for a Discharge Certificate allows you to sell the property free of the IRS tax lien. However, the application must satisfy the provisions outlined in section 7. They include
- Selling the property to fund payment of the outstanding debt.
- If the property’s value is more than twice the tax liability’s value covered by the tax lien.
- If the government’s interest in the property has no value
- A bond or deposit is made by a third party equaling the government’s interest in the property.
You should apply for Discharge of Property at least 45 days before the transaction. This way, there is enough time to process the application. Ensure you mail the completed forms to the right address with all the necessary attachments.
4. Apply for Subordination
IRS tax liens give the United States government legal rights over the property mentioned. A certificate of subordination does not cancel the IRS tax lien. However, it allows other creditors to move ahead of the United States government. The implication is that it makes it possible to obtain a mortgage or get different types of loans. Subordination certificates are issued under the following basis.
- You pay an amount equal to the lien or interest in the property.
- If the certificate’s issuance increases the amount, the IRS gets and makes the tax debt collection easier.
The information provided during the application is reviewed and verified before your application is accepted. This process takes some time and should be initiated as soon as possible to avoid the last-minute rush.
IRS tax lien withdrawal is the best outcome any taxpayer can get. It erases any records of the lien ever existing. Additionally, your rights to the property are fully restored. The most common reason for withdrawal is when the IRS made a mistake in issuing the tax lien. It could be due to an arithmetic error in assessing the tax owed or failure to give enough notice before filing the tax lien. In case of a dispute, then you can be free to appeal and wait for the determination. Another way to have the tax lien withdrawn is to convince the IRS that doing so will make it easier for them to recover the tax owed.
Get Help from an IRS Tax Lien Professional
Although IRS tax liens are serious stuff, they can be resolved. Given the process’s delicate nature, we recommend having a tax professional with you during the process. True Resolve Tax Professionals specializes in helping businesses and individuals in New York overcome tax challenges. Our team of IRS enrolled agents will use their expertise to help you settle your tax debt. Please don’t risk your assets by going through the process alone; contact us today for all your IRS tax lien problems.