An Overview of Federal Tax Liens

The IRS has several methods of collecting the taxes it is due, and for many taxpayers, this may include the filing of a federal tax lien. Essentially, a lien is a claim on behalf of the government against the current and future property of the taxpayer including real estate, cars, bank accounts, and earnings in the amount of the taxes and penalties owed to the government.

The lien, which is usually imposed on debts of $25,000 or more, acts as an encumbrance on the property of the taxpayer so that when the taxpayer seeks to sell the property, the proceeds of the sale will go towards paying off their debt to the government. Of course, the government may have to be patient and wait for the encumbered property to be sold so that it can recoup the monies owed. This is one of many ways in which a lien differs from a levy. A levy is a forced collection where the IRS seizes property and sells it to satisfy the debt. A levy requires a lot of legal wrangling to get the property and then to sell it.

Once the IRS decides to put a lien on your property, it files a Notice of Federal Tax Lien that puts all creditors on notice that the government has a legal interest in your property. This filing puts the IRS in front of any other creditors who may have a claim against the property, including mortgage lenders and banks. It is most often recorded in the county where the taxpayer’s property is located, either with the Secretary of State or the local county court.

In addition to letting all of your creditors know that a federal tax lien has been filed against you, the Notice of Federal Tax Lien is also often communicated to credit reporting agencies from which it can be shared with interested parties, including employers and prospective lenders. Not surprisingly, this information usually has a negative effect on your credit score and even your possible chances at employment. The IRS does not update the status of the lien balance meaning it is up to YOU, the taxpayer, to get an updated balance from the IRS to provide to other creditors to show compliance.

If a federal tax lien is assessed against you and your property, the best way to get rid of it is to pay the outstanding tax debt as soon as possible. The IRS will then file a Certificate of Release 30 days after the payment is made in the same jurisdiction that it was originally recorded. The Certificate of Release tells creditors, employers, and others that you have satisfied your debt to the IRS, there are no further outstanding debts, and the property is now no longer subject to the lien.

There are a few ways to secure the Certificate of Release. Payment of the debt can also mean posting a bond guaranteeing the payment of the debt, you have negotiated an Offer in Compromise with the IRS and fulfilled your obligations with respect to that offer, or the time for collection has expired, in which case the release will be automatic.

It is also possible to seek a withdrawal of the lien, whereby the IRS withdraws the lien from the property, but the taxpayer still has an outstanding debt. Withdrawal may be used when the taxpayer enters into an installment agreement to pay the debt so as to make it easier for the taxpayer to pay the debt.

If you are facing a federal tax lien, you do not need to face it alone. Contact our firm at (305) 374-5544 today to get started.

Written by Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL is a Miami-based law firm focused on providing comprehensive legal support to individuals and corporate entities caught up in tax controversies or charged with a criminal act. As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.