October 28, 2020
Suddenly, your nightmare has become a reality – you owe the IRS money, and they’ve placed a lien on your property in order to recover those funds. They’ve sent notices informing you of the lien (or liens) and stated the reasons for these impending penalties. At this point, two different options are on the table – either you satisfy your debt and file to remove the lien, or for one of several very particular reasons, if the lien is not valid, then you must file to have it withdrawn or removed. In both cases, you need to seek professional help to file the proper forms and monitor the IRS’s responses. After all, tax lien removal is never as simple as it sounds. Confused as to next steps? Let’s start at the beginning.
Liens Versus Levies
What’s a tax lien versus a tax levy? The two are tools used by the IRS in order to collect funds from taxpayers who owe them money. However, there are some drastic differences between the two options. A tax lien is very much like a judgement. It’s public record, so anyone find out that you owe the IRS money once the lien if filed. It’s mainly there to let other creditors know that the IRS has claim against your property.
A tax levy, on the other hand, is when the IRS actually takes what it has staked its claim to. Those items of yours that have liens filed on them are no longer yours. The IRS will physically take your property, sell it at auction, and use those funds to satisfy your debts. If it’s a bank account of any kind, they simply remove the funds that are owed, leaving you with the remainder, if any. When a levy is in place, those assets are no longer yours. As you can see, though both are serious, a levy poses a much more dire and serious situation than a lien.
Why Does the IRS Place a Lien On Your Property?
So, why does the IRS place a tax lien on your property? To put it simply, they do this because you owe them a significant amount of money. They need to collect back taxes from you, and this is how they do so. Before it reaches this point, the IRS will send you several clear warnings or notices, all of which you have the ability to appeal or request a hearing on.
For example, the first notice simply informs you that they believe you owe the IRS money. From there, they’ll threaten you with liens through a series of increasingly serious notices until the lien is actually placed on your property. If you ignore these notices and fail to contact them, the IRS will assume you owe the debt (after all, you aren’t objecting to it or appealing it), and they’ll place a lien on you and your property.
One way to avoid this, is to file for a collection due hearing which typically involves you and your accounting representative meeting with an IRS agent to assess your financials and tax records. If the two parties – you and the IRS – can reach an accord at that point and you fulfill the terms of your payment plan, a lien is never filed. However, if you don’t, a lien will indeed be placed on your property.
What a Lien Does
An IRS lien is designed to secure the IRS’s interest in your assets. It can be attached to bank accounts, future paychecks, your business’s property, all of your company’s accounts receivable, physical property like cars, boats, houses, vacation homes, and more. If you own it and the IRS wants it as collateral, in a way, to recoup any money that you owe, then they can place a lien on it.
When a lien is placed on anything you own, your rights are limited. You may not be able to open any new credit accounts or take out loans, because the lien will appear on your credit report and lower your FICO score. Additionally, you may not be able to access any of the money in your bank accounts, because your assets may be frozen. You will not be able to sell your vehicles because the titles to them will not be free and clear, due to the lien. Your best course of action to protect your assets is to work with the IRS in order to pay your debt to them.
Can You Have a Lien Released or Withdrawn?
Once you’ve paid the money you owe the IRS and your debt is settled in full, you can legally have the tax lien released. This requires a form that must be filed with the IRS itself. Once that form has been processed, the IRS will discharge the lien on your property, making it free and clear once again.
There is also an additional option called a withdrawal, which removes the lien from the public eye. For example, a withdrawal will remove any trace of the lien from your credit report, and restore your credit to what it was before the lien was placed. In order to receive a withdrawal from the IRS, you need to meet several conditions, such as having a good track record of filing your tax returns on time and paying any amounts due in full for the past three years. In addition, if you still owe money to the IRS, have been fulfilling your payment plan, and owe them less than $25,000, you can file to have the public lien released as well. However, obviously, it’s still best to avoid having a lien placed on your property in the first place by being proactive in your dealings with the IRS. Also, it’s important to keep in mind that filing for bankruptcy won’t clear an IRS lien or force them to put a withdrawal on your record.
What About Lien Subordination?
There is also something called lien subordination. This is when the IRS is no longer the top debt holder on your property. For example, if you were trying to take out a second mortgage or line of credit on your home, you wouldn’t be able to if the IRS lien appeared first on that property. However, if the IRS decides to allow for a lien subordination on the house, they are no longer the primary debt holder, and you may be able to qualify for that mortgage or loan. Again, this is a courtesy extended by the IRS and something you may need to have a tax accounting professional help you request.
Getting Assistance with Tax Lien Removal
Have you paid your debt to the IRS? Are you still having issues with the removal of your tax lien? If these are issues you need assistance with, your best option is to seek immediate guidance from a tax accounting expert who can help you file the correct paperwork to have your lien removed.
At the Enterprise Consultants Group, our team has extensive experience in the federal tax industry and can assist you with all your tax lien removal needs. We have a proven track record of success in IRS dealings and can help you move forward with your life after clearing IRS debt.
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