How Do IRS Tax Liens Work?

Over the past two years, many people's incomes have fluctuated significantly, and businesses that were previously profitable are now struggling to survive. In such a situation, it's easy to accrue large amounts of tax debt. If you owe the IRS and are unable to come up with the money you need, they might put IRS tax liens on your property. This means that they can gain access to any assets and income you have. Unlike other creditors, the IRS has a lot of power, and they can potentially take away money you have earned or assets you have accumulated. However, there are ways to fight against a lien. An experienced tax resolution specialist will be able to help keep your property intact. Let's have a closer look at what tax liens are and what you can do to protect yourself against them.

What Are IRS Tax Liens?

A tax lien is a legal claim the government has to your property. They will place it on your home, bank account, or other assets when you have failed to pay off the tax you owe for an extended period of time. You will receive such a lien after the IRS has determined what you owe them and sent you a bill for it. If you don't come up with the amount in a timely manner or you refuse to pay, the government is legally allowed to garnish your wages or your property.

They will file a document called the Notice of Federal Tax Lien, which will be public, so your other creditors have access to it. This doesn't actually mean that your property belongs to the IRS yet. It simply confirms that they have the right to levy it in the future. If you keep refusing to pay, the government might seize your assets and then sell them to pay your debt.

What Can Be Garnished?

Anything of value that you own can be garnished by the IRS. This is different from other types of debt you might have. For example, if you don't pay back your car loan, the creditors can take away your car, but they can't gain access to your other property. The IRS may place a lien on your house, your vehicles, your personal possessions, and the money currently in your bank account.

What's more, they can also garnish your wages. If you don't pay off your debt, they might start to take a portion out of your paycheck each month. Any future assets you acquire for the duration of your lien can also be accessed by the IRS.

Other Ways a Lien Affects Your Life

The main danger of a tax lien is that you will lose your property and the money you have earned. However, this process could also affect your life in a number of other ways. Since the Notice of Federal Tax Lien is a public document, future potential lenders will have access to it. This could either cause you to get rejected for a loan, or it could significantly increase the interest rates you are offered, resulting in further financial hardship.

What's more, IRS tax liens can be attached to all your business assets, including the money coming in from your clients or customers and any property your company owns. In this way, it could ruin your business and your primary source of income. It's also important that what you owe the IRS can't be wiped out by filing for bankruptcy. While many of your other debts are discharged during this process, you'll still have to pay your taxes in full.

How to Get Rid of the Tax Lien

Although bankruptcy is not a viable way of getting rid of your tax debt and the lien placed on your property, there are several other methods that can help. You should always pay off your full balance if at all possible, as this is the most straightforward way out of the situation. However, there is also a debt forgiveness program, which can help you either spread out the payments or reduce the total amount you'll need to pay back.

Pay What You Owe the IRS

When you first get in touch with your tax specialist about a tax lien, they will have a look at your debt, your income, and your expenses. That way, you get a better idea of whether you could pay off the entire amount in the near future. This could completely remove the lien from your property, meaning that you don't have to worry about it being seized by the IRS.


Make an Installment Agreement

Immediate payment is usually not an option because it can be hard to get rid of a large amount of debt quickly. However, people who still have a good income and some money left over every month could opt for an installment agreement. This spreads out your payments over a longer timeframe, making it easier to come up with the money.

As soon as your tax specialist has negotiated with the IRS, you will no longer have to worry about your lien. Since you now have an agreement, the IRS will no longer pursue you or threaten your assets. As long as you keep up with the payments, you won't have any more trouble.

Make an Offer in Compromise

Sometimes, it is simply not feasible to pay the whole amount. For example, your income might have declined significantly, resulting in a real financial struggle. In such a situation, your tax expert might suggest making the IRS an offer in compromise.

This involves explaining why you can't pay off everything and offering a smaller amount instead. If the government believes that you are truly unable to pay the whole balance, they will accept this and remove the lien from your assets.

File for Currently Not Collectible Status

Those taxpayers who have no current income or whose expenses exceed their income won't be able to pay off any of their taxes. In such a case, filing for "Currently not collectible" status could be the best way forward because this relieves you from paying any taxes or losing your property.

However, this isn't a permanent discharge of the debt. If your situation changes in the future, for example, because you have a new job or your expenses are significantly lower than before, you will have to pay off the remainder of your debt.

Tax debt is a common issue, with millions of Americans struggling to pay what they owe the IRS. If you fail to do so for a prolonged period of time, IRS tax liens might be placed on your property. This could mean that you will lose your income, your home, any valuable items you own, and your savings. What's more, you might have trouble getting credit later on, and your business will suffer as a result.

Fortunately, there are several things you can do to get rid of your tax lien. The easiest way to do so is to pay off your debt in full, but this isn't always an option. The IRS also offers several debt forgiveness programs that can help you regain your financial footing. Get in touch with us today at Tax Alliance in Santa Ana, CA and book an initial consultation with one of our tax specialists. We will be happy to help you fight for your rights.

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If you are not happy with our tax services within the initial 21 days, we will give you a 100% refund of services rendered, no questions asked!

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