An IRS federal tax lien involves establishing a legal interest in a property when back taxes aren't paid. The outcome is that an IRS property lien entitles the Internal Revenue Service to some or all of the equity when that asset is either sold or recovered. A lien will be issued when the liability has been assessed, a Notice and Demand for Payment has been sent out and the balance remains unsettled 10 days after notification has been provided.
Filing a Notice of Federal Tax Lien (NFTL) enables the IRS to 'perfect the lien' which may entitle them to preference to the available equity over other creditors. Provided that the debtor makes payments towards their outstanding taxes, it is unlikely to affect the owner's right to continue living in or using that property.
Launching an Appeal to Get a Federal Tax Lien Release
An IRS manager can be asked to review the case and a Collection Due Process hearing can be requested at the Office of Appeals. This request must be filed prior to the date specified on the notice. Potential areas of discussion at the hearing include:
- All taxes and penalties have been cleared prior to the introduction of the IRS property lien.
- The lien was assessed during bankruptcy and should have been subject to an automatic stay.
- There was a procedural error during the assessment.
- The time period specified in the statute of limitations led to the debt expiring before the lien was legally in place.
- There wasn't an opportunity to dispute the assessed liability.
- That person wishes to discuss collection options or a spousal defense.
When Will the IRS Grant a Federal Tax Lien Release?
- Internal Revenue Service procedures denote that the IRS property lien was filed too early.
- An IRS installment agreement has been entered to pay off back taxes.
- Removing the interest in the property makes collecting tax debt easier.
- The taxpayer advocate has determined that it is in the best interests of both parties.
Property Sale and Federal Tax Lien Release
Once all back taxes, penalties and interest have been paid off or a bond is provided that guarantees the repayment of the debt, the IRS property lien will be removed. An IRS lien release takes place 30 days after either of these actions have taken place.
When deciding to sell the property, it is necessary to apply to the Internal Revenue Service for a Certificate of Discharge. If the IRS has an interest in several properties, request one for each asset that is being sold. Complete IRS Form 14135, Application for Certificate of Discharge of Federal Tax Lien.
How an IRS Federal Tax Lien Affects Credit?
IRS property liens will be recorded by credit reference agencies so borrowing money or refinancing will be far more difficult in the future. It will show on a credit report for a period of 7 years. If the debt isn't paid, it could continue to show for up to 15 years from the date of filing.
Other Relevant IRS Federal Tax Lien Prevention Articles of Interest Include:
IRS Wage Levy: Stop Wage Garnishment to Recover Unpaid Taxes - Information on how to pay off back taxes and avoid wages being garnished by the IRS.
Filing Taxes Late: Dealing with Past Due Tax Returns & Back Taxes - Experiencing difficulty with unpaid back taxes? Find out how to apply for an IRS tax extension and affordably pay off unpaid taxes.
Filing Tax Returns Late? Automatic IRS Tax Return Extension - Late filing a federal income tax return and need additional time? Prevent IRS tax penalties by requesting an automatic 6-month tax extension.
Sources
"File a notice of a federal tax lien." Internal Revenue Service (IRS).
"Certificate of discharge from federal tax lien." Internal Revenue Service (IRS).
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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