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Tax Lien - What is It, Its Negative Effects, and How To Release It

Submitted by: Back Taxes Help, LLC

2009-08-01 23:19:46

(OPENPRESS) August 1, 2009 -- What is a Tax Lien?

To secure payment of taxes, a IRS tax lien can be imposed on a piece of property. Both personal and real estate property can be assessed a lien. Your failure to pay income taxes in full or on time can result in a lien.

Section 6321 in the Internal Revenue Code states: 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, belong to such person. As you can see, the IRS makes it very clear that they are able to use a federal tax lien in order to get what is theirs.

Tax liens can also be issued by the state and local governments. Unfortunately, the rules and regulations are different from state to state. If you are worried about a state tax lien you should learn more about the details in your particular area. It is not a good idea to assume that your state acts in the same way as the IRS.

Negative Effects of a Tax Lien

There are many reasons why you never want to face a tax lien of any kind. When you owe taxes you will have to pay them at some point in time. You can only hide from the IRS, state, and local governing bodies for so long. If you are hit with a federal tax lien you are going to experience many negative circumstances.

Once a tax lien is attached to a property the IRS has rights to the asset until the proper amount of tax is paid or another arrangement is made.

If a federal tax lien does not force you to pay what you owe, you will face additional penalties. Next in line is a tax levy. This is when the IRS will take your assets and sell them off to get the money you owe. As you can see, a levy is a step beyond a lien. Common types of tax levies include to your bank account and wage garnishment.

A federal tax lien will also make it difficult for you to get the credit needed to make purchase such as a home, additional property, etc.

Tax Lien Letters

If you are close to being hit with a federal tax lien you will receive a letter from the IRS stating your liability. This letter will also include information on how much money you owe in interest and penalties. Ignoring this letter will not do you any good as the IRS has several more that they will send, in order. They include CP-501, CP-502, CP-503, and CP-504. As each letter is sent, the tone will get more and more forceful. If all of these letters do not force your hand, a Notice of Federal Tax Lien is filed.

How to Release a Federal Tax Lien

Releasing a federal tax lien is not always easy, but you do have several options.

1. Wait until the statute of limitations expires. After 10 years the IRS can no longer collect back taxes. It may sound like a good idea to wait for as long as possible, but the IRS usually will not let this happen. Instead, they will enforce a tax levy to get their money.

2. Pay what you owe. The best way to release a federal tax lien is to pay the entire amount of money owed to the IRS. As soon as you do this the lien will be released.

3. Payment plan. The IRS knows that you may not have the money to pay all your back taxes. That being said, you can opt for a payment plan which allows you to have your lien released as long as you promise to send money every month until you debt is satisfied.

4. Offer in compromise. This is a way of settling your back taxes for less than you owe, and subsequently having your federal tax lien released. The IRS does not settle with anybody who asks. You have to apply for an offer in compromise. If it is accepted your lien will then be released.

5. Appeal process. If you feel that the lien is unfair you have the right to appeal it by requesting a hearing.

For more information on Back Taxes Relief self-help information for tax liens visit today.

Contact Info

Back Taxes Help, LLC
Phone: 203-813-7549
53 Halloween Blvd
Stamford, CT 06902


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