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What Can Be Done About Your IRS Tax Lien?

How to Deal with an IRS Tax Lien

157310044When it comes to IRS tax liens, there is only so much you can do about them. In the eyes of the IRS, the damage is already done. There are limited instances where the IRS can get rid of a tax lien, however, keep in mind that it is only the cause of an underlying issue—tax debt. There are two different types of IRS tax liens—a general lien, and a property lien. Here’s some guidance from our Michigan Tax Lawyer, on IRS tax liens.

What is an IRS Tax Lien?

An IRS tax lien is a form of security interest granted over an item of property to secure the payment of a tax debt or to comply with some other obligation. A tax lien is a notification imposed by law upon a property to secure the payment of taxes.

One reason a tax lien is imposed is for delinquent taxes owed on real or personal property. It’s a legal right to keep or sell somebody else’s property as a security for a debt. This type of IRS tax lien attaches itself to your property itself– forcing you to take action. This is not to be confused with a tax levy, which is the actual act of seizure of the property. These are not the types of tax liens discussed in this article.

The other type of tax lien is filed as a result of failure to pay income taxes or other taxes. This type of tax lien attaches to your money, your credit and public records. Like property tax liens, these types of tax liens can also be attached to specific pieces of property. If proper action is taken early enough in the collection process, IRS tax liens can often times be avoided issued for tax debts less than $50,000. A tax lien will normally stay in place until your back tax debt is paid in full. However, there are limited instances in which you can convince the IRS to remove a lien after it has been filed without first paying the taxes in full.

Consequences of IRS Tax Liens

A tax lien to secure the payment of taxes is the most general type. This goes on your credit report as a tax lien against all of your assets. Tax liens are recorded at your local county Clerk’s office and are public record. Pretty much, this lets everybody know that you owe taxes. Credit reporting agencies will know that you have a tax lien filed against you, so an IRS lien will damage your credit score.

You should be warned here—beware of scams. If you get an IRS tax lien, you will receive endless letters from companies trying to help that sound too good to be true. While it is true that in certain cases, taxpayers are able to settle their tax debts for far less than what they owe, be advised that not everybody qualifies for this program. Your eligibility depends mainly on your current financial condition, and a thorough review of the facts of each individual case must be made before anyone can provide a reliable estimate as to how much you can settle your tax debts for.

Be careful whom you do business with, because you could end up in a worse position than you started. You should start by dealing with the underlying collection matter. When it comes to the IRS, a lien should be the least of your worries.

To Get IRS Tax Liens Removed…

In order to remove IRS tax liens, all taxes owed must be paid in full. You must have a history of making payments.  As an option to release IRS property tax liens, there are a few things you can do to help your situation.

If the IRS has a lien on your house, they generally will not remove it unless you are selling the house and the proceeds of the sale will be paid to them. If you want to re-finance your house, you can apply to have the lien subordinated. That means that the IRS agrees that the new mortgage company gets paid first in the event of a future sale. A bank will not give you a mortgage unless their lien is first.

There is one other circumstance you can get a lien removed without having to first pay your taxes. That is, if you owe less than $25,000, have a payment plan, or history of making payments on time, you can apply to have it withdrawn.

An offer in compromise is another option, in which you would settle your debts to the IRS, with the help of a highly skilled attorney. With an offer in compromise, you may be able to get a lien removed without paying the full amount of your taxes. This is because if they initially accept your offer, the IRS has essentially agreed to reduce your tax debt to the amount you offered them as a settlement. Once you pay the offer amount, your past due taxes are reduced to zero, and the lien is withdrawn.

The key message is the need to take care of the reason why you owe these tax debts. If you pay the tax lien in full, or enter into an installment repayment program that will lead to your lien being paid in full, you can petition the IRS to withdraw your lien, rather than release it. If you are successful in doing so, it will come off of your credit reports immediately.

Getting liens removed under any of these methods generally requires filling out many forms and carefully navigating through the process. Your tax attorney will have much contact with the IRS to make sure that the lien does not affect you in the long run. For more information on dealing with tax liens, feel free to give us a call, or send us an e-mail here.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.