While they sound similar, a tax lien is different from a tax levy, although both are frequently used by the IRS and other tax agencies to collect tax debts. A Notice of Federal Tax Lien is a legal claim by the IRS against your property to secure the payment of a tax debt. A tax levy is the actual legal seizure of property to satisfy the tax debt.
For this article, we’re specifically discussing the difficulties of a federal tax lien, which will always come directly from the IRS.
How to Know if the IRS Has Filed a Federal Tax Lien
The good news is that you’ll always know if the IRS has filed a federal tax lien. First, the IRS has to file the lien with a county or state office. Then, the IRS has to send a copy of the Notice of Federal Tax Lien to the taxpayer by mail. This notice becomes a part of the public record, so credit reporting agencies can view the lien, which may impact credit scores, ability to obtain financing, etc.
Options for Responding to a Federal Tax Lien
Once you receive a copy of the federal tax lien, there are a few ways you can respond. First, you can simply pay the tax in full and the IRS will remove the lien.
If that’s not possible, you can request a Collection Due Process hearing. This is a chance to dispute the amount owed, payment options, or other relief.
Otherwise, a taxpayer can request withdrawal, release, or discharge of the tax lien. To do this, they’ll need to look at IRS Form 1660 to understand their appeal rights. The documentation needed to fight a federal tax lien can be complicated, and it differs depending on the needs of each situation.
To understand the best way to present your appeal of a tax lien, consult with a tax attorney. They can give you a personalized legal approach that puts your best foot forward with the IRS.
Types of Property That Fall Under a Federal Tax Lien
The IRS routinely files a lien to encumber real property, which means any land and the structures on it. The lien places a hold on the property, so that if you try to sell the property the tax debt has to be paid from the sale proceeds.
A federal tax lien can be attached to personal property as well. Personal property includes machinery, furniture, equipment, etc. Tax liens against personal property tend to be the most problematic for businesses, but individuals can be negatively impacted as well.
Payment Plans and Tax Liens
The IRS offers an installment agreement, which is a payment plan to pay off the debt over time. The lien generally remains in place even if you enter an installment agreement. However, the IRS may grant a request for release of a lien where the balance has been reduced to $25,000, and you continue to make payments under the installment agreement.
Consult With a Tax Attorney About Your Notice of Federal Tax Lien
If you cannot pay in full, it can be difficult to work with the IRS and ensure your desired outcome when a Notice of Federal Tax Lien is involved. To figure out the best way forward with regard to your tax lien, contact Mindy Meigs for a consultation today.