The Internal Revenue Code and the IRS's own procedures, set forth in the Internal Revenue Manual, give properly informed taxpayers opportunities to prevent the filing of tax lien notices, but you must be pro-active and work with the IRS in an effective and timely manner. Failure to do so will inevitably result in the filing of lien notices in the public record, after which is it very difficult to get the lien removed.
IRS Tax Lien
An IRS Tax Lien is a legal filing on all of your property for the satisfaction of an IRS Tax Debt. The IRS
will file a IRS Tax Lien in an attempt to collect back taxes owed.
Credit Reports
You can expect your IRS Tax Lien to be reported on Experian, Trans Union and Equifax after a full month has past since the filing of your IRS Tax Lien with your County Recorder's Office. Ideally, our IRS Tax Attorneys need to protect your assets before the IRS Records the Notice to Lien with your County Recorder.
IRS Tax Lien and Your Real Property
Many questions about the impact of the federal tax lien involve real estate, and the reach of the lien often turns on the particular form in which ownership is held, especially where there is more than one owner.
Most encumbrances on or interests in a taxpayer's property, if properly perfected prior to the date on which the federal tax lien arises, have priority over the lien. Notice of the lien must be filed before it has priority over most subsequently perfected interests in the taxpayer's property. But once the notice is filed, the federal tax lien takes priority over all but a few subsequently arising interests in the taxpayer's property. Remember, the lien itself does not transfer or convey the taxpayer's property to the IRS. Such transfer of ownership is accomplished either through a judicial foreclosure of the lien, or through an administrative action such as a levy.
The IRS Collection Process
If you do not pay IRS Tax debt in full when you file your Tax Returns, you will receive a Tax bill from the IRS. This bill begins the IRS collection process, which continues until your account is satisfied or until the IRS may no longer legally collect your Tax Debt, for example if the collection period has expired.
The IRS can potentially attach an IRS Tax Lien to all of your assets, including your home, your car, your Social Security number, and even your spouse's assets whether or not they were involved.
Some of the actions the IRS may take to collect back taxes owed include:
- The IRS will file a Notice of Federal Tax Lien,
- The IRS will serve a Notice of Levy (most likely IRS Wage Garnishment or IRS Bank Levy); or
- The IRS will keep your refund to which you are entitled.
An explanation of the IRS collection process is as follows
The Federal IRS Income Tax Lien is a claim against your property, including property that you acquire after the IRS Tax Lien arises. The IRS Tax Lien arises when you fail to pay the back taxes you owe within 10 days after the IRS sends you the first bill. By filing a Notice of Federal Tax Lien, the IRS establishes its interest in your property as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Once an IRS Tax Lien arises, the IRS generally cannot issue a "Certificate of Release of Federal Tax Lien" until your tax, penalties, interest, and recording fees are paid in full or the IRS may no longer legally collect the tax.
An IRS Notice of Levy is another method the IRS may use to collect taxes. A IRS Levy means that the IRS can (and will) confiscate and sell your property to satisfy your IRS tax debt. This property could include your car, boat, bank account(s), real estate or other valuables. The IRS may also levy assets such as your wages, bank accounts, Social Security or Disability (SSDI) benefits and retirement (i.e.Veteran's pension) income. In addition, the IRS will apply future federal tax refunds that you are due, to offset the amount you owe. Any state income tax refunds you are owed will also be applied, by the IRS, to your liability.
An IRS tax lien attaches to every piece of property in your name and to all your rights to property, including accounts receivable if you own a business. A federal tax lien is the IRS' way of freezing your finances in an effort to secure payment for the tax you owe.
If you are a homeowner, you can kiss your equity good bye. The IRS Penalties and Interest (approx. 45% per annum ) will eat your equity away. The IRS can sit on this IRS Tax Lien and collect a lot of money from you.
Once an IRS Tax Lien is filed, good luck trying to get a car loan, rent an apartment / house or get credit. Will you be able to get a car loan? Yes. Will it be a new car? Most likely not. Will the car dealer get you a loan with extremely high interest rates, Yes. It would be cheaper and quite frankly smarter for you to have an IRS Tax Professional resolve your IRS Tax Debt.
Once the IRS has filed an IRS Tax Lien against you, the process of finding the right Action Plan becomes all the more important. All of your particulars need to be known to us during our consultation. Before your Bank Account is Levied or the IRS Garnishes your Wages, an Action Plan needs to be in place.
We need to look at all of your possibilities to drastically reduce your present IRS Tax Debt. This could include filing Unfiled Tax Returns, preparing an IRS Offer in Compromise or IRS Penalty Abatement or having you declared Currently Uncollectible.
IRS Tax Lien Subordination
Homeowners seeking to refinance their mortgage can Petition the IRS to Subordinate an IRS Tax Lien.
Homeowners seeking to sell their home for less than the amount of their mortgage can request the IRS to discharge the IRS Tax Lien.
The IRS also can issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property.
Given our current economic circumstances, it is good to know that an adjustment can be made to the IRS Tax Lien on your home so that the IRS will be second in line to be paid. If the IRS is next in line, then a mortgage lender can move to the top of the pack, meaning they will be more likely to invest in your home.
There is no guarantee that your request for a IRS Tax Lien Subordination will be granted, especially, if the IRS determines that you can pay the IRS without making any changes to the mortgage on the property. Otherwise, if the IRS Tax Lien is subordinated, then homeowners can get a loan that can help them pay off their IRS Tax Debt.
Although there in no guarantee, in light of the credit crisis and real estate bust plaguing much of the US, the IRS promised to make tax lien subordination even more available than it has been in the past for taxpayers facing financial hardships.
TAX Lien Removal
The Tax Attorneys at Flat Fee Tax Service may be able to reverse a Federal Tax Lien if the IRS improperly filed the Tax Lien or if the IRS didn't follow the specific procedural order required by law. Another valid argument for reversing a Federal Tax Lien is if the IRS based the IRS Tax Lien on an incorrect tax assessment.
It is Flat Fee Tax Service’s position to find the most economical way for you to resolve your current IRS Tax problem. We will always look to reduce your IRS Tax Debt to the lowest dollar amount possible.
An IRS Tax Lien is also the precursor to filing an IRS Levy ( IRS Wage Garnishment ). How do you feel about losing most of your paycheck, your Social Security or Social Security Disability (SSDI)?
Go to our Section on IRS Wage Garnishment or IRS Bank Levy if you are "curious" about the ramifications.
You may be eligible and qualified for an IRS Offer in Compromise or IRS Penalty Abatement.
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