The IRS has a number of weapons in its arsenal to collect past due taxes. One of the most drastic tools that the agency has is to place a lien on your property. When you receive notice that the IRS has done this, you should hire a tax defense lawyer to help you assess your options.
What Is a Tax Lien and How Does it Affect Your Property?
A lien is a claim that the IRS places against your personal property when you have an unpaid tax debt that the agency has been unable to collect. When the IRS places a lien, it does not automatically mean that your property will be sold. It does mean that the IRS has secured its own interests against your property when you eventually do sell it. A lien also means that the IRS could eventually seize your personal property and sell it if the tax debt continues to remain unpaid.
Having a tax lien on your property can keep you from being able to sell it when you want. Because there is a lien on the property, the title to it is not clear. Prior to purchasing property, a prospective buyer will perform a title search on it. This search should reveal the existence of a lien because it is a matter of public record. They will not want to complete the transaction until the lien is addressed. Accordingly, it is in your own interests to resolve the situation with the IRS in the hopes of having the lien removed.
In addition, a tax lien can also be disastrous for your business or personal credit. You may be unable to borrow more money or secure a line of credit when there is an outstanding lien that has not been satisfied or withdrawn.
How to Address a Tax Lien on Your Property
Since the IRS will only place a tax lien when there has been a tax debt that has not been paid for some time, you will need to address your tax situation before the lien can be removed. There are two primary courses of action that you can take:
- You can challenge the tax debt itself that forms the basis for the lien
- You can negotiate a resolution with the IRS that can result in the removal of the lien
Challenging the Tax Debt
Once the IRS has placed a lien on your property, you must act quickly to challenge its determination. You have 30 days from the time that the IRS has placed the lien to challenge or appeal the lien. If you exercise your rights in time, you are always entitled to due process, since the IRS’s actions affect your interests in your own property.
You may argue that the IRS has incorrectly placed a lien on your property or that they are seeking the wrong amount. You can also seek to have the lien removed on the grounds of financial hardship.
Here, you must file initially with the IRS Office of Appeals, which will consider the evidence that you have presented before reaching its determination about whether to keep the lien on your property. If your initial appeal to the IRS is unsuccessful, you can take your case to the United States Tax Court. You must appeal the determination within 30 days after receiving notification from the IRS of its decision.
Negotiating a Resolution with the IRS
It may still not be too late to work with the IRS to resolve your tax issues that led to the placement of the lien. However, you are facing an uphill battle, given the fact that the agency only placed the lien after months of efforts to collect a tax debt and numerous notices to you of the issue. Nevertheless, it may be in your interests to try to negotiate with the IRS in an attempt to reach a resolution that can lead to the removal of the lien.
The easiest way to remove the lien is to pay your tax debt in full. Still, the fact that the IRS placed the lien in the first place can lead to long-term issues with your credit. In addition, you may not have all of the money available to you that is necessary to pay the lien.
Reaching an installment agreement can give you more time to pay the money that you owe, but you are still obligated to pay the full amount. Nevertheless, the IRS may remove the lien once you reach an installment agreement, which can remove the immediate threat to your property. The IRS may reinstate the lien if you fail to make payments under the installment agreement.
You always have the ability to try to negotiate the tax debt with the IRS by making an Offer in Compromise. If the IRS accepts your OIC, you may end up owing less in taxes than you would have originally. The IRS is under no obligation to accept your OIC, and the agency has recently been rejecting more of these offers than it had in the past.
You Must Engage with the IRS
Whether you are trying to challenge the lien or reach a negotiated solution, you must engage with the IRS when it has placed a lien on your property. Ignoring the situation will not make it go away. Eventually, the IRS may seize your property or force a sale, making it imperative that you immediately hire a tax defense lawyer to represent you in the legal process.
Contact a New York Tax Defense Attorney
When you are facing a tax lien, you should hire a New York tax defense lawyer to deal with the IRS on your behalf. At the Thorgood Law Firm, our deep knowledge of tax law and how the IRS works can be leveraged for your benefit when you are facing a difficult situation. Schedule a free initial consultation by reaching out to us online or by calling us today at (212) 490-0704.
Frequently Asked Questions
What is an IRS tax lien?
An IRS tax lien is a legal claim against your property when you fail to pay a tax debt. It secures the government’s interest in your assets, including real estate, personal property, and financial assets.
Does a tax lien mean the IRS will take my property?
Not immediately. A lien does not mean seizure, but it gives the IRS the right to claim your property if the debt remains unpaid. Continued inaction can eventually lead to a levy or forced sale.
How does a tax lien affect selling property?
A tax lien creates a cloud on the title, making it difficult to sell your property. Most buyers will not proceed with a purchase until the lien is resolved.
Can a tax lien affect my credit?
Yes, a tax lien can negatively impact your ability to obtain loans or lines of credit, even though it may not always appear on traditional credit reports.
How can I remove an IRS tax lien?
You can remove a lien by paying the debt in full, entering into an installment agreement, negotiating an Offer in Compromise, or successfully challenging the lien.
Can I appeal an IRS tax lien?
Yes, you typically have 30 days to request a hearing with the IRS Office of Appeals to challenge the lien or the underlying tax debt.
What is an Offer in Compromise?
An Offer in Compromise is an agreement with the IRS that allows you to settle your tax debt for less than the full amount owed, if you qualify.
Why should I hire a tax defense attorney for a tax lien?
A tax defense attorney can negotiate with the IRS, protect your property, challenge incorrect liens, and help you explore options to reduce or resolve your tax debt.