Tax liens are often confused with tax levies. A lien is different from a tax levy, which is the seizure of your assets. A lien is, instead, a claim to your assets. This means that the IRS will place a formal legal claim against your property or assets, making it public record that they have a right to own it. This may not sound as severe as a levy but it can have long-term financial consequences. Furthermore, a lien can go on your credit report, damaging your credit greatly. An official tax lien can also make it impossible for you to sell assets.
Like a levy, a lien is a late step taken by the IRS. You will have had to owe back tax debt, previously been informed by the IRS that you owe it (you will receive a Notice and Demand for Payment), and then either ignored your debt or refused to pay it. The IRS will then file a Notice of Federal Tax Lien to inform creditors that the government has a legal right to your property.
If you are experiencing a tax lien, you will want to get it removed as quickly as possible.
Some ways to remove your tax lien:
- Pay your tax debt in full. This is the simplest way to remove a tax lien. The IRS will remove the lien within 30 days of receiving full payment.
- Discharge of property. This action can remove a lien off of a specific property under certain circumstances, generally ones that involve the taxpayer’s plan to sell their property to satisfy their tax debt. The IRS will remove a lien on a property so that it can be transferred to a new owner free of having a lien.
- Subordination – This action doesn’t fully remove your tax lien but allows other creditors to be paid before the IRS. This is useful for those who need to use a property that is under tax lien to refinance or use as a collateral for a loan that will go toward paying tax debt.
- Withdrawal – This action can remove a tax lien as if it were never there. This can either happen because the tax debt has been fully paid, because the lien was filed falsely, or it can happen if you qualify for the Fresh Start Initiative. You must make a formal request to have your record of lien erased (using form 12277)- it will not disappear on its own.
Having a lien is a stressful experience for any taxpayer. It’s best to avoid this situation by never ignoring a notice from the IRS. But, if you already have a lien in place, you can get rid of it. The tax experts at Vanguard Tax Relief are here to help you get to a better financial place. If you have a lien, contact us a Vanguard Tax Relief to see which options are right for you. A tax expert can not only get your lien removed, but also help you create an agreement with the IRS to help you finally get out of tax debt.