Failing to pay taxes owed to the federal or state government may result in a tax lien against your personal assets or business. Tax liens serve as a guarantee of payment for tax debt, which allows the IRS to seize assets when a tax liability has not been satisfied.
There are two types of tax liens: a federal tax lien and a state tax lien.
Here are the differences between the two and the steps to find if you have a federal or state tax lien in California.
What Is the Difference Between a Federal Tax Lien and a California State Tax Lien?
A federal tax lien originates from the IRS after the agency assesses a tax against you and sends a bill you neglect or refuse to pay. A California state tax lien is issued by the state government of California when you owe tax debt and refuse to pay. The statutory liens attach all your California real or personal property you owe or have rights to.
Both liens serve as the federal and/or state government’s legal claim against a delinquent taxpayer’s property. It secures the tax debt and notifies creditors.
Does California Record Federal Tax Liens?
California records federal tax liens at the request of the IRS. In California, federal liens are recorded with one or more county recorders or with the California Secretary of State.
Typically, a lien is recorded with county recorders if it concerns real property, such as vacant land, homes, and buildings. Liens related to personal property, such as vehicles, mobile homes, business assets, and equipment, are filed with the California Secretary of State.
Are Federal Tax Liens Recorded at the State or County Level in California?
In California, federal tax liens are recorded at the county clerk’s office in the California county where the real property subject to tax liens is situated. On the other hand, personal property is recorded at the state level (filed with the California Secretary of State).
The tax lien record acts as a public notice to creditors that the IRS has a legal claim against property.
Does a Federal Tax Lien Have Higher Priority Than a California Tax Lien?
When a federal tax lien competes with a state tax lien, the priority of liens is determined by order of recording date. In California, priority is given to the lien that was first created.
How Do I Do a Tax Lien Search in California?
Liens are public records in California. If you want to check for tax liens recorded in California, you can contact the California Secretary of State or your local county clerk.
The following information is required to request a certified copy of a federal or California state tax lien:
- Taxpayer Name
- Taxpayer Social Security Number
- Recording Reference (i.e., book and page numbers)
Will a California Tax Lien Search Show If I Have an IRS Lien?
A California tax lien search shows if an individual has either a California state lien or IRS lien or both. A search can show liens filed in California, including with county offices.
How Do You Resolve a Federal Tax Lien in California?
The quickest way to remove a federal tax lien when you live in California is to pay your tax debt in full. After paying your back taxes, the IRS will release your lien in 30 days.
However, if you cannot pay the IRS debt in full, consider other options:
If you believe the tax lien was recorded in California in error, you can file an appeal with the IRS. For IRS tax liens, appeal via the Collections Appeals Program (CAP). During the hearing, you can either choose to represent yourself or hire a tax professional such as an attorney or CPA.
If you live in California, consider applying for tax lien withdrawal.
You can qualify for tax lien withdrawal if:
- Lien withdrawal is in the best interest of you and the IRS
- You paid your full tax debt, and the IRS removed your lien
- Withdrawing the lien helps the IRS collect the remainder of what you owe
If you are eligible, you can apply for tax lien subordination. Subordination will not mean your lien is removed. However, it allows other creditors to move ahead of the IRS. This may make it easier for you to get a loan or mortgage in California.
A tax lien discharge removes your lien. You may consider discharge if you want to sell the asset(s). To qualify for a discharge, you must pay the IRS in full or guarantee their interest in your assets. If your assets in California are worth at least double the amount you owe the IRS, they may discharge your lien.
IRS Payment Plan: If you cannot pay your back taxes in full, you can take advantage of IRS payment plans. Payment options include long-term and short-term payment plans (less than 180 days).
The long-term payment plan is an installment agreement that involves paying monthly. If you are experiencing an ongoing financial hardship, you may also qualify for an Offer in Compromise to settle your debt for less than you owe or Currently Not Collectible status.
Do I Work with the IRS or the State of California to Resolve a Federal Tax Lien?
The IRS issues federal tax liens on behalf of the federal government. This means, therefore, that you can only resolve a federal tax lien with the IRS.
How Do I Find My Local IRS Office in California?
If you need help with a tax lien or want more information, you can visit your local IRS Tax Assistance Center (TAC). Use the TAC office locator tool to find the California office you need to visit and make an appointment by calling the number for that office.
Federal and California state tax liens can prevent you from getting credit or selling your home.
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