What is an IRS Tax Lien?
Taxpayers who owe back taxes and fail to either pay off or make payments on the tax debt may have to deal with the IRS issuing a legal claim against their assets. Legally referred to as a tax lien, this claim means the federal government now has jurisdiction over all or some of your financial and personal assets.
In other words, if the IRS issues a tax lien on your assets, it may ultimately seize these assets and apply them to your tax debt. Also, filing bankruptcy after you receive notice of an IRS tax lien may not stop the process of the federal government seizing bank accounts, property, vehicles or other valuable assets.
What is the Difference Between a Levy and a Tax Lien?
A levy notice may follow a tax lien notice if you don’t enter into a payment plan with the IRS. A taxpayer receiving a levy notice can expect the IRS to soon thereafter garnish wages or take property they own to pay off or pay down the tax debt.
How Many Balance Due Notices Will a Taxpayer Receive Before the IRS Issues a Tax Lien?
In most cases, taxpayers will receive five letters indicating they owe back taxes before receiving a tax lien notice. The IRS calls this series of five letters its “notice stream.” This stream consists of the following notices: CP14, CP501, CP503, CP504, and L1058/LT11.
There are time limits on when the IRS can issue a tax lien. If you haven’t heard from the IRS within three years of filing a federal tax return, then you likely won’t hear from them. However, be aware that when the IRS places a tax lien on your property, this lien remains for 10 years, or until you pay off the debt.
Discharge of Property and Subordination
To qualify for a discharge of property, taxpayers must apply for the discharge and submit the form to the IRS. Include legal documents pertaining to the property (contract, mortgage lender information, property appraisals) and a copy of the tax lien issued by the IRS. If the IRS considers the property essential to maintaining a basic quality of life, they will likely discharge the property from the lien. Have questions? Schedule a call with us.
How to Avoid IRS Tax Lien Problems
Of course, paying off the tax debt is the easiest and quickest way to get rid of an IRS tax lien on your property. Once you pay off the tax debt, you can expect the IRS to release the lien, typically within 30 days.
Wiztax can able to help you avoid an IRS tax lien when you’re unable to pay the full amount you owe the IRS. Answer a few simple tax questions and our online system instantly shows your Offer in Compromise (OIC) settlement amount, whether you qualify for Hardship Status, and/or your Payment Plan options. An OIC allows you to submit an offer to the IRS to settle your tax debt for less than the full amount owed. If you’re suffering severe financial hardship, you may qualify for Hardship Status and not have to make payments until your situation changes. Payment Plans allow you to pay off your tax debt with manageable monthly payments.
If you owe back taxes and need tax relief to avoid an IRS lien, learn how our free online system makes it easy to get affordable help with settling your tax debt once and for all.
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