Tax Liens: What You Should Know

Though it happens every day, whether intentionally or unintentionally, not paying taxes owed to the IRS can allow the federal government to file a claim against you known as a tax lien. Though this claim does not immediately go onto your public records, and thus is initially referred to as a "statutory" or "automatic" lien, it will eventually become very public information and can and will be used against the person or business by credit reporting agencies.

How Does A Tax Lien Affect Me?

As soon as the IRS files a lien with your county, it can be available for credit card companies to view. It will affect your credit report and credit score negatively, which could make it difficult to open credit cards, make large purchases and more. You'll also have a hard time getting any of your credit extended.

How Can I Avoid A Tax Lien?

The only way to avoid having the IRS file a lien on you is to pay your owed taxes in full. There are many ways to settle your debt if you can't pay the cost up front, but you should always stay on top of your taxes and contact the IRS immediately if this is the case.

How do I Know I Have One?

You will receive a letter of notice from the IRS once a lien has been placed on any of your assets. You can also check your local courthouse to see your public records.

Can I Get Rid Of It?

Yes, you can get rid of your IRS tax lien by paying your owed amount in full. There are also options in which you can file an Offer in Compromise, which states that you do not currently have the entire amount but will come to an agreement of a payment plan or some other sort of compromise, depending upon circumstances. Tax liens can also expire after ten years of the initial billing if the IRS doesn’t refile them, but waiting for the bill to expire is extremely risky and harmful to your credit.

*Not a solicitation for legal services*

Three Possible Options to Take if You Owe the Government Money

For people who never owe money doing taxes to them is nothing more than filling out a sheet of paper and waiting for a check, but if you usually owe money it’s nothing but stress and worry.  This problem gets worse if you end up owing several years of back taxes, and that scenario is a lot more common than you’d think.

When some people think of taxpayers who owe the government money they think about wealthy business owners who have been purposely hiding money away, but in reality, that’s rarely the case.  People from all walks of life can owe the government money, and if you don’t make a lot, paying off the debt can take a while.  If you owe the government  taxes there are certain things you can do that can help make paying off your debt easier.

Installment Agreement

An installment agreement is essentially a payment plan you schedule with the government. This option is simple, but in order to qualify you have to meet certain requirements:

Offer in Compromise

This may sound strange, but it actually is possible to work out a deal with the IRS about the amount of debt you pay back.  In order to  get this, the IRS must doubt that you can ever reasonably pay back the tax debt you owe.  The offer in compromise isn’t easy to get, and you should consult an experienced tax debt consultant if you’re serious about filing for this. 

Be Declared as “Currently Not Collectible”

If you can send the IRS credible evidence that proves that you have no ability to pay your debt, they may declare you as “currently not collectible”.  Once the IRS declares a taxpayer as currently not collectible, the IRS must stop all collection activities, which includes all levies.The IRS will still send an annual statement to the taxpayer, but that form is just for the taxpayer’s records. 

*not a solicitation for legal services*