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What is a Tax Lien

What is a Tax Lien

The US government has more than $20 trillion in debt. To put this in perspective, there are only 100 billion stars in the Milky Way galaxy, and there are only 1 billion cars on 1-94 during rush hour. Okay, so that last one was mostly a joke. But that number should tell you that the IRS is very serious about collecting debt that you may owe.

That is why we are here to help. If you have run up a debt on your taxes, and have been hit with a tax lien, it is a good idea to contact an experienced tax debt relief attorney and keep reading this article.

The Legal Definition of a Tax Lien

US federal law states that: “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.”

If you haven’t fallen asleep, there is a good chance that we are going to have to unpack that. That is fine, we got you. Once you translate it from legalese to English, it is pretty straightforward.

The first part of that jumble is critical. Tax liens only happen when you do not pay your taxes, or you fall behind. If you keep up with how much you owe, you probably don’t need to worry about what a tax lien is. When you don’t pay, or pay less than what you actually owe, then you need to start thinking about this a little bit.

Many people do not understand what a lien is. It is a claim on your property, but it is not the same as seizing your property. If that sounds confusing, bear with us.

A lien ensures that the government gets first right to your property over other creditors. This is basically like the IRS calling dibs on your house. While the government coming to kick you out of your home is probably not going to happen, a tax lien can make it incredibly difficult to sell that property or to secure a line of credit. This is due to the fact that the IRS or the state taxing authority gets paid first.

Oh, and your credit score is probably going to take a hit. So you can kiss those car loans or that rental agreement goodbye.

A lien is not the same as a levy. When the IRS files a lien, they just secure their interest in your property. When they file a levy – that is a much more serious issue. This is when they seize and sell any property that you own or have an interest in. A levy can follow a lien, but they are not going to jump straight to seizing your property and putting it up for sale.

The Tax Lien Process

examples of tax liens

There are three steps in this process. When the IRS wants to file a tax lien, they will:

  1. Assess your debt
  2. Send a “Notice and Demand for Payment” that explains how much you owe, and helpfully suggests that you must pay it
  3. File a “Notice of Federal Tax Lien” that alerts you that the government has an interest in your property

What to Do if You Have a Tax Lien

The first thing you need to do is to remain calm. There is no sense in losing your head. It can be scary, and we get that. We are here to help.

The easiest way to get rid of a lien is to pay all of your taxes. This is not always an option. Even when it is an option, it is not always the best way to do things.

You can enter into a direct debit installment agreement. This works pretty similarly to how a loan works. You agree to pay off the debt until the amount is paid in full. People are allowed to negotiate on this one, and that usually ends up working out in their favor.

There is a special status that you could apply for. The IRS does not want you to starve, even if it looks that way. If you simply cannot afford to pay the IRS, you don’t have to.  You can ask for something called currently not collectible status. This puts your debt on hold until you can pay it off.

A statute of limitations can be applied to your tax debt. That means that the government has a certain time frame during which they must collect. After this time frame, you might be home free. This is probably not a good route to go. Remember those tax levies we mentioned early? Yeah, you don’t want any of that.

The IRS is not perfect. If they did not follow the correct procedures, you can fight back. If you can successfully prove that the IRS did not follow the right steps, you may get your tax lien released.

The best thing you can do if you have a tax lien is to call a lawyer. They will be able to explain your options to you.

Ayar Law can be your tax debt relief attorneys. Our talented and experienced team has already helped many people across the country. If you have a tax lien against you, contact us today.

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.