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Federal tax liens: how to avoid, satisfy and obtain relief from them

When a taxpayer is unable to pay his or her tax debt, one of the consequences is that the Internal Revenue Service will file a Notice of Tax Lien, a document notifying creditors that the federal government has a legal right to the taxpayer’s property to satisfy the debt. A federal tax lien can affect a taxpayer in a variety of ways, including limiting the taxpayer’s ability to obtain credit and impacting a taxpayer’s ownership interest in personal and business assets, even if the taxpayer files for bankruptcy.

Avoiding a lien is matter of filing and paying all taxes owed in a timely manner. Taxpayers who take advantage of repayment options like an offer in compromise or a repayment plan or installment agreement can avoid a lien if they abide by the terms of the agreement or plan. Getting rid of a federal tax lien is also a matter of fully paying off tax debt, but if this can’t be done immediately, there may be options for relief for certain taxpayers. 

One option is to have the lien removed from specific property, which is known as discharge. This can allow a taxpayer to protect certain possession he or she does not want to lose to the IRS. Subordination, which is another option, does not remove the lien but does allow other creditors to take priority over the IRS with respect to payment of debts, which can open up the taxpayer’s ability to pursue credit. With either of these options, the taxpayer must meet certain requirements to be eligible.

A third, and slightly more multifaceted option, is withdrawal, which refers to the removal of the Notice of Federal Tax Lien, which can effectively open up the taxpayer’s credit options, yet without discharging the taxpayer’s obligation to pay the debt. Several versions of withdrawal are available, depending on a taxpayer’s circumstances. Taxpayers should work with an experienced attorney to determine what is right for their situation and to receive guidance and advocacy in filing the necessary paperwork and working with the IRS.

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Located in Atlanta, The Peck Group, LC, represents clients nationwide. Regionally, we are committed to serving clients in Fulton County and throughout the state of Georgia.