An IRS tax lien can create significant challenges for individuals and businesses. It represents the government’s legal claim against your property when you fail to pay a tax debt. A lawyer, like an IRS tax lien lawyer, knows that while it doesn’t result in the immediate seizure of assets, it can have long-term consequences that affect your financial stability and ability to access credit.
How An IRS Tax Lien Works
The team at Luck Law knows that when the IRS determines that you owe unpaid taxes, they issue a demand for payment. If the debt remains unresolved, they may file a Notice of Federal Tax Lien in public records to notify creditors of their claim. This notice applies to all your property, including real estate, personal possessions, and financial accounts, and remains in place until the tax debt is satisfied.
Effects On Credit And Financial Standing
One of the most immediate consequences of an IRS tax lien is its impact on your credit. Although tax liens no longer appear on consumer credit reports, they can still influence your ability to secure loans. Many lenders and financial institutions check public records for liens, and having one may signal financial instability, leading to higher interest rates or outright denials of credit applications.
A lien can also create issues when refinancing your home or taking out a mortgage. The IRS’s claim may complicate or delay transactions, as their lien must be resolved before new loans can be approved.
Restrictions On Property Transactions
An IRS tax lien attaches to all your property, both current and future. This includes:
- Real estate. If you try to sell or refinance a home, the lien must be addressed first. This often involves using proceeds from the sale to pay the tax debt.
- Vehicles and other personal property. The lien extends to personal assets, potentially reducing your ability to sell them freely.
- Business assets. If you own a business, the lien applies to its assets, including inventory and accounts receivable. This can hinder operations and reduce the company’s marketability.
Potential For Escalation To Seizures
A tax lien is different from a tax levy, but it can lead to one. While a lien secures the government’s interest in your property, a levy allows the IRS to seize assets to satisfy the debt. If the lien remains unresolved, the IRS may escalate to garnishing wages, freezing bank accounts, or selling property.
How To Address An IRS Tax Lien
There are several ways to resolve an IRS tax lien, depending on your circumstances:
- Full payment. Paying the tax debt in full is the fastest way to release the lien. The IRS typically removes the lien within 30 days of payment.
- Installment agreements. Setting up a payment plan can help prevent further enforcement actions and demonstrate your commitment to resolving the debt.
- Offer in compromise. If you qualify, you may negotiate with the IRS to settle the debt for less than the full amount owed.
- Lien withdrawal. In some cases, the IRS may agree to withdraw the lien, particularly if you have entered into a payment agreement or resolved the debt.
Find A Legal Team To Help You
An IRS tax lien can create significant obstacles in your personal and financial life. From impacting credit to complicating property transactions, the consequences are far-reaching. Attorneys like those at Crepeau Mourges can attest to the importance of addressing tax liens promptly and strategically. Taking proactive steps to resolve the lien is critical to reducing its effects and regaining financial stability. Find legal help you can rely on today.