Top 7 FAQs About IRS Tax Liens

Roni Deutch
June 30, 2009 — 1,905 views  
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Finding a notice of an IRS tax lien in the mail can be a scary and intimidating thing. However, there are several steps you can take to overcome the situation and prevent the IRS from taking any further action against your property. Unfortunately though, many taxpayers do not even understand exactly what a tax lien is, let alone how to deal with it.

1. What is an IRS tax lien? A federal tax lien is the government's claim on your property as security against an IRS tax debt. Before a lien can be filed, the IRS must notify you and send a notice of payment due. If a delinquent taxpayer refuses to pay the debt after 10 days, then the IRS can create a tax lien for the amount of the debt. Once filed, it will be attached to all of a taxpayer's property including houses, cars, and even accounts receivable for businesses. The lien also becomes a public document, and will usually affect the recipient's credit score.

2. How will I know if there is a federal tax lien on my property? Before the IRS can file a federal tax lien, they will first send you what is called a Notice and Demand for Payment. If no action is taken to resolve the payment due, then the IRS will mail you a Notice of Federal Tax Lien. Legally, this notice must be mailed within 5 days after a tax lien has been filed. They might also try to contact you by telephone, but legally they are required to send you notice via standard mail.

3. What is the difference between a tax lien and a levy? Although taxpayers frequently confuse tax liens with a levies, they are actually two completely different things. A tax levy is the actual collection of property or assets in order to pay off the debt you owe the IRS. It can take the form of a wage garnishment, a bank levy, or even a property seizure. A tax lien, on the other hand, is a notice that the government has the right ensure payment of the debt by securing the debt against your property. It's a good idea to think of a tax lien almost as a mortgage against the property, and if you decide to sell it, then the IRS will claim a right to the proceeds of the sale.

4. Why did the IRS file a lien against me? Tax liens are normally filed against taxpayers who have acquired IRS back tax liabilities. This "taxpayer" could be any individual, but can also be an estate, company, corporation, partnership, association, or trust. Although the exact reasons for the owed back taxes will vary case by case, it is usually the result of unpaid income taxes.

5. How do I get the lien released? The only way to have a tax lien released is by settling the original tax debt. It will be immediately removed if you pay your debt immediately through a lump sump payment or if you file an Offer in Compromise that is accepted by the IRS. However, if you enter into a monthly payment program with the IRS, such as an Installment Agreement, then the lien will stay in tact until you have satisfied the terms of the agreement. Additionally, if the statute of limitations on the debt expires, then the lien should be automatically removed.

6. What law gives the IRS authority to file a tax lien? Section 6321 of the Internal Revenue Code gives the IRS the legal authority to file a tax lien. It states: "If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."

7. How can I prevent a tax lien? The best way to avoid a tax lien is to avoid a tax debt in general. This can be accomplished by filing accurate tax returns with the IRS so that you stay 100% compliant. However, if you are already behind on your taxes, then you might want to consider entering into an IRS settlement program such as an Offer in Compromise to avoid getting a tax lien in the future.

About the Author

The Tax Lady Roni Deutch and her law firm Roni Lynn Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight IRS tax liens on your behalf.

Roni Deutch