IRS Tax Liens – State Tax Liens

Federal IRS Tax Liens can make your life miserable!   When your taxes are not paid the IRS has the option to establish a lien against any or all of your assets. The easiest, of course is a home, if you own one. A lien recorded against your home gives the IRS the legal right to collect taxes from the sale of your assets, which they usually don’t. The purpose of the lien is to secure their interest in your property should you attempt to refinance it (pull cash out without paying the IRS), or selling the home. If you need to refinance to pay the IRS, they’ll allow that. If you need to sell your home, you can negotiate an agreement to sell your home so long as then get some or all of the taxes you owe. The IRS (and the State of California) will work with you if you approach them knowledgeably.

tax problemAn IRS lien can be against you, your spouse, or your company. A lien against your company would could end up seizing your accounts receivables. At this point everything you own is just one short step away from becoming the property of the United States Government. That’s not good, because there are some people at the IRS that are all about “closing cases” to make sure their job performance is appreciated by higher ups. If you have a lien you should work at getting it removed.

Tax Liens Affect Your Credit Rating

IRS Liens filed against you will eventually show up on your credit report and that will often negatively affect you. In particular, banks are nervous to open accounts (as they see liens turning to levies all the time). It’s dollars and cents. The banks don’t want the extra work when the IRS comes in to take your money.

An IRS lien on your tax report may means that record you won’t even qualify for a reasonable automobile. The list of of problems that a lien will cause you is endless.

If you are in a collection process with the IRS —even if you submit an IRS Payment Agreement and it is accepted— the IRS may decide to file a Notice of Federal Tax Lien to secure the government’s interest in your home or other property. It usually has to do with the size of the debt that you owe. The IRS recently raised the minimum debt amount for tax liens to $10,000. That does not mean the IRS WILL file a lien, it is just a minimum threshold that is interesting to note. A Federal Tax lien establishes priority as a creditor in competition with other creditors in certain situations, such as your selling a home or other real estate; and in bankruptcy proceedings. Once a lien is filed, it may appear on your credit report, so it is important that a you begin working to resolve your tax debt as quickly as possible, before a tax lien filing becomes necessary.

A IRS or State of California tax lien acts like an insurance policy to ensure your tax liability is not overlooked.

You Need to Make Contact – Make Attempt to Stop Lien Filing

If you have unpaid, delinquent taxes and you have not yet reached out and made a “documentable effort” to resolve the debt or set-up a payment plan, then the IRS will send a series of computer-generated tax liability assessment letters, which will list your unpaid taxes, penalties and interest charges. Eventually, you will reach the end of the letter campaign and the final letter(s) will advise you and warn you that a lien is about to be filed and the IRS is “intending to levy.” This letter is your final notice. It is the IRS’s way of saying: “We have tried unsuccessfully to collect your tax debt so our next step is a tax lien.

If you take those last letters seriously, and act before the threat of a lien actually becomes a lien, you as a taxpayer, can possibly avoid the all the bad consequences of having a lien recorded against you and your assets. If you act quickly, you may even qualify for a penalty abatement, which can reduce the total amount you owe by as much as 50%.

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