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How does a federal tax lien work?

On Behalf of | Aug 25, 2020 | Tax Law |

Paying tax debts sometimes proves challenging. A Georgia taxpayer might owe a significant amount of money and does not pay the IRS when the agency attempts to collect. Sometimes, the IRS may respond with a federal tax lien. Anyone dealing facing threats of a lien for the first time might wonder what one is.

Essentially, the IRS attaches itself to assets to recover money owed. A lien involves the IRS making a legal claim against assets. If someone owns a house, the IRS might lien the property. When the person sells the home, part of the closing would likely involve “paying off” the IRS debt.

Real estate is not the only thing the IRS could lien. Financial accounts and even personal property could be subject to liens. Of course, paying off the debt could release the lien within 30 days. The IRS cannot maintain a lien to address a “zero” balance. That said, a lien could remain in place due to oversights. Making sure a lien gets removed may become a priority for a taxpayer who clears out the debts.

Some people confuse liens with levies. A levy involves the IRS directly takes property to pay a debt. A bank levy, for example, involves the IRS taking money out of the taxpayers’ accounts.

Federal tax liens doubtfully appear out of nowhere. The IRS does send a written notice about taxes, penalties and interest owed. Taxpayers who do not pay their tax bill may face a lien either due to neglect or outright refusal to pay. Taxpayers might not realize they have options available to them when dealing with significant or even minor tax debts. An installment agreement is one. An offer-in-compromise is another.

Liens establish the IRS’s claim to property to pay legitimate a tax debt. Taxpayers may want to work with an attorney to find solutions to prevent a lien.

We insist that your taxpayer rights are protected and your options are known.

Our services are confidential and are protected under the attorney-client privilege as allowed by law.