Tax Lien Frequently Asked Questions (FAQ)
Q: How will you know if a tax lien has been placed on your property?
A. Before the IRS can place a tax lien, they will first assess a taxpayer with a liability and demand payment. If the taxpayer makes no payment within ten days of the demand, the IRS can send out a notice of federal tax lien. The IRS will then send you in the mail a Notice of Federal Tax Lien after the tax lien has been filed. They may also try to contact you by phone, but that is not required.
Q: How will a tax lien affect me?
A: A tax lien used to have a significant impact on a taxpayer's ability to borrow. However, since the credit bureaus began removing tax liens, some lenders leverage other products now to assess if the taxpayer has a tax lien. Once the IRS files the tax lien, the tax lien becomes public, and the IRS will have a claim to your property. Since the IRS has priority for property acquired after a tax lien, this makes it more difficult to borrow future money. The tax lien may not show up on your personal credit report (since 2017) but can show up on other consumer and business reports. Also, IRS stated that those who pay off their taxes or paid it off could request to have the tax lien withdrawn. Furthermore, those who owe less than $25k and set up a direct debit installment agreement can have the tax lien withdrawn (removed from public records) after demonstrating a successful payment history.
Q: What property is subject to a tax lien?
A: A tax lien covers all property a taxpayer owns plus any future property they may acquire. The rule keeps it very broad and open to interpretation and can pretty much cover anything. The property can be both tangible assets and intangible assets.
Q: Can I sell my home with a tax lien on it?
A: Yes, you can sell your home if there is a tax lien on it. The process can be complicated, but it can be done. The tax lien must be satisfied before the sale can be finalized. This means that the proceeds from the sale must first be used to pay off the tax lien. If you don't have any equity in your home, you may be able to request a lien discharge from the IRS.
Q: How can I find the best professional to help me with a tax lien problem?
A: At TaxCure, we have developed a system that allows taxpayers to filter tax professionals with the exact type of experience they are looking for. Tax liens can be complex since they can be issued by the IRS or by state taxation agencies. Our network allows taxpayers to filter by the agency they are having problems with and then select their problems and/or their desired solution. The results that are given to the taxpayer are a list of professionals rated from highest to lowest with experience with those exact problems and/or solutions. Start your search below to find the top-rated pros to help you with your problem.
Q. Can a tax lien be released?
A: Yes, a tax lien can be released. The IRS requires you to get back into compliance with your taxes for the tax lien to be released. You can release a tax lien by paying in full, settling through an offer in compromise, letting the statute of limitations expire on the taxes owed, or if the IRS accepts a bond that guarantees payment of the taxes. If you paid your taxes, be sure to ask now for your tax lien to be withdrawn instead of paid or released by contacting the IRS.
Q: How can I avoid a tax lien?
A: The best way to avoid a tax lien is to stay in full compliance with tax law. If you find you cannot pay taxes, it is best to contact the IRS and make an agreement with them to pay your taxes back through one of the various settlement mechanisms instead of avoiding or not taking immediate action on IRS notices that have been received.
Q: Why did the IRS file a tax lien on my property?
A: The main reason why the IRS files tax liens are because of unpaid income taxes. Tax liens will generally now be filed if you owe $10,000 or more but could be issued with smaller tax amounts. There can be various reasons as to why taxes were not paid, but when the IRS finds a taxpayer that they feel may be trying not to pay their taxes, they will place a lien to ensure payment of the taxes owed.
Q: What is the difference between a tax lien and a tax levy?
A: A tax lien is only the government's “invisible” claim on the property that is owned by the taxpayer, but a tax levy is the actual seizure of the assets held by a taxpayer. With a tax levy, the IRS can take money from bank accounts, garnish wages, or even seize physical property owned by the taxpayer.
Q: What if I don't agree with the lien being filed? Can I appeal?
A: If you don't agree with the tax lien being filed or you believe it was filed in error, the tax lien may be able to be appealed. There are certain criteria that the IRS has established to allow the lien to be appealed, the full list of reasons can be found here.