M&M Financial provides free tax guides on its website. Here is the information contained in the IRS Tax Liens guide. Click here to request the following free tax guides.
• IRS Tax Liens
• Penalty Abatement
• Offer in Compromise
• IRS Levy and Garnishment
• IRS Installment Agreement
IRS Tax Liens
If you have unpaid IRS tax, sooner or later the back tax liability will be assessed to your tax identification number and collection will ensue. A tax lien is a simple tool used by the IRS to collect tax debts. Not to be confused with a levy or garnishment, the IRS tax lien may damage your credit and cause other creditor nightmares, but it will not seize money from your bank account or paycheck. Below is some general information about the IRS tax lien.
What Is an IRS Tax Lien?
An IRS tax lien is a legal claim by the US Government against your property as security for payment when you owe a back tax debt. Before a Federal tax lien exists, the IRS must:
• Assess a tax liability to you;
• Send you a Notice and Demand for Payment;
• You must also neglect or refuse to pay the tax debt within 60 days.
The IRS tax lien attaches to property and rights to property owned on the date the tax is assessed and acquired thereafter. These are the requirements for a statutory tax lien, which attaches to your property, but cannot be seen by other creditors.
To have priority over other creditors, the IRS must file a Notice of Federal Tax Lien (NFTL) to be recorded according to state law, usually with the County Recorder of Deeds, Secretary of State’s office or both. A NFTL may be recorded in multiple counties and multiple states, depending on where the taxpayer resides and where property is located.
Remember, if you have a NFTL in place, resolving your tax debt through a formal Installment Agreement, CNC status or an OIC may allow you to request the Withdrawal of the tax lien.
How Will an IRS Tax Lien Affect Me?
A NFTL will notify other creditors of the government’s right to your property. It may prevent you from selling assets, lower your credit score, make it very difficult for you to borrow money and may even prevent you from opening a new bank account. A tax lien even attaches to any future assets you may acquire while the lien is in place. If you owe business taxes, a tax lien will attach to your business property, even accounts receivable.
You will also begin to receive a tremendous amount of phone calls from tax resolution companies.
Why Am I Getting So Many Phone Calls?
When a tax lien is filed with the Secretary of State or county recorder’s office, it becomes public record. This is when the phone calls begin. Tax resolution companies gather this information and reach out to struggling taxpayers, mostly through the telephone and by mail.
There are pockets of tax resolution companies in areas such as Denver and Southern California. You’ll receive a lot of solicitations from companies in these areas. Typically, if one company shuts its doors in Colorado, groups of employees will sprout new companies, often using the same business practices. This can be dangerous because the same business practices put the original company out of business in the first place.
Many of these companies are big, carrying 100 or more employees. As you can imagine, many times their clients get lost in the shuffle. Their clients end up paying the price in additional fees and shotty work. M&M carries less than 20 employees by design. This ensures accountability and consistency to our clients and allow for quick case resolution. The owners of M&M work every day in the business, just like most of our clients. Additionally, we only take on those clients we truly feel we can help.
Do I Have a Tax Lien or Levy?
Many people confuse liens and levies, and vice versa. While a tax lien secures the US Government’s position to collect a tax debt, a levy actually transfers the asset to the IRS to satisfy the tax debt. For example:
I owe the IRS $10,000 in back income tax. I also have $20,000 in my savings account. The IRS tax lien merely claims a right to $10,000 of my $20,000 in the bank. A levy will actually cause the bank to remove my $10,000 and send it to the IRS as payment to satisfy my debt.
How Long Will It Take the IRS to Release My Tax Lien After I Full Pay My Tax Debt?
The IRS states that a Release of Federal Tax Lien will be sent to the recording office within 30 days of full payment of the tax liability.