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Do I have a Federal Tax Lien?

Do I have a Federal Tax Lien?

A federal tax lien is a document filed by the Internal Revenue Service against the property of a tax debtor who has failed to pay up their tax debts.

This document gives the government a legal claim over the property of the person who owes a substantial amount to the government as tax. This lien can cover assets or properties owned by the tax debtor to enforce payment of the tax debt to the government. A federal tax lien when given is usually made public by being published and listed in the local government lien properties and with the owner of the property listed as a tax debtor to the federal government.

However, a federal tax lien doesn’t just come all of a sudden. It starts off when the taxpayer fails to file tax returns and pay their taxes. The chances of getting a tax lien increases when the taxpayer ignores multiple notices from the IRS about accumulating monthly penalties from failure-to-file, failure-to-pay, and other additional penalties. Eventually, after several notices and accumulation of tax debts that never stops increasing, the IRS will file a federal tax lien against the property of the tax debtor.


A notice will be sent by the IRS to the tax debtor stating the tax debt that is owed to the government and if no action is taken by the debtor to pay up or make a payment deal with the IRS,  the Federal tax lien will be filed and published for the general public. This attracts tax lien certificate buyers and investors interested in purchasing the legal claim of the government to your property.


Regardless of how unfeeling the whole idea of a tax lien may sound, it is important to realize that an IRS Tax lien is not placed unfairly by the government. The taxpayer is at fault most of the time because a prior notice would have been delivered to them about the tax debt owed and the possible actions that would be taken by the IRS if the tax debt is not paid in due time. Also included in the notice would be a complete calculation of the tax amount due and the accumulated interests due to tax penalties for non-compliance to the tax code.


After the notice is delivered to a taxpayer, he/she is expected to contact the IRS for more information and a possible solution to the problem. He/she can either decide to pay up the required amount due or in cases where they are unable to pay the full amount, a suitable payment plan can be worked out with the IRS to prevent the possibility of a Federal tax lien.


However, failure to pay or failure to contact the IRS within ten days after receiving the notice will lead to the filing of a notice of federal tax lien by the IRS which will give the government a legal right to your properties presently owned and even those that might be purchased within the period when the federal tax lien is imposed.

The IRS would even lay claim to funds acquired by the tax debtor in this period of time, including funds from the sales of property to offset the tax debt until it is paid in full. Therefore, it is wiser to pay off your tax debt as quickly as possible to prevent other IRS claiming your funds through a federal tax lien. Also if the tax debtor has a tax refund, it would be withheld and used by the IRS to settle part of the tax debt. This will at least reduce the amount of total debt owed.

A federal tax lien will give the government a legal claim to your assets which can lead to issues in selling off assets and it can limit your ability to get credit from creditors.


How to find out if you have a Federal Tax Lien on your property

  1. You will receive a notification from the IRS that a federal tax lien has been filed against you. Before this notification, a Notice of demand for payment should have already been sent and after ten days without any action taken by the tax debtor, a Notice of federal tax lien will be filed against you by the IRS.


  1. Calling the IRS office to find out if you have a federal tax lien and requesting necessary information about your tax debt is also a good way to know if you have a federal tax lien on your property.


  1. Checking for properties listed for federal tax lien in the office of the secretary of state website. You can check through all the properties listed to see if your property is listed among them. You can search by state, local government area, and other detailed information that can help you locate your property faster if listed.


What do I do when I get a federal tax lien?

The easiest way to deal with a federal tax lien is to pay off the tax debt and every other interest required. Another way is to contact the IRS for the best payment plan suitable for your financial status and start paying in installments. Another viable alternative would be to enroll in the fresh start program that was created by the IRS to provide relief to tax debtors and make it easy for them to pay up their tax debts.

Once your payment is completed, or the tax debt is reduced to a reasonable amount ($10,000 and below), a request to withdraw the federal tax lien can be made and approved. Nevertheless, the tax debtor will still need to complete the payment totally.

Every taxpayer is advised to always pay their taxes on time because this is the best way to avoid a federal tax lien. Even if for any financial reason, the total tax liability cannot be paid, tax returns should always be filed to prevent a failure-to-file penalty. Additionally, an installment payment arrangement should also be looked into as an option for suitable payment conditions spread over a period of time.


When will my federal tax lien be removed?

An IRS-imposed federal tax lien can only be removed under the condition that the amount of tax debt owed has been paid in full, the federal tax lien was filed due to an error on the part of the IRS, a payment agreement has been approved and paid to a reasonable amount, or an offer in compromise has been successfully agreed upon between the tax debtor and the IRS. Any other tax resolution method may be inapplicable to this situation.

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Internet subscribers, users, and online readers are advised not to act upon this information without seeking the service of a professional accountant. Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties, of any kind, under U.S. federal tax laws.