What is an IRS Tax Lien?

An IRS tax lien is a legal claim against your property when you neglect, fail or are unable to pay back taxes. An IRS tax lien protects the government’s interest in all your property, including real estate, personal property and financial assets. An IRS tax lien exists after the government:

  1. Assesses your tax liability;
  2. Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
  3. You neglect, refuse or are unable to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors and all others that the government has a legal right to your property.

How long does it take to release an IRS tax lien?

Once a tax debt is satisfied, the IRS will release the tax lien within 30 days.

tax lien

What are the mechanisms that can lead to the release of an IRS tax lien?

  1. Successful completion of an Offer in Compromise
  2. Full payment of the tax liability
  3. Bankruptcy
  4. Automatic payment agreement via a streamlined installment arrangement
  5. Execution of a collateralization agreements
  6. Purchase of a surety bond
  7. Expiration of the statute of limitations

How can a tax lien affect you?

  1. Assets – a lien attaches to all of your assets (such as property, securities, and/or vehicles) and to future assets acquired during the duration of the lien.
  2. Credit – once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
  3. Business – the lien attaches to all business property and to all rights to business property, including accounts receivable.
  4. Bankruptcy – under certain circumstances, a tax lien may survive a bankruptcy action.

Lien vs. Levy

A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your back taxes. A levy actually takes your property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize and sell most types of real or personal property that you own or in which you have an interest.

What you need to know about a Tax Lien:

  1. Tax liens are filed by the IRS to secure their right to collect money against you as a priority creditor. For example, you would be unable to utilize any equity you may have in your home without first paying the IRS.
  2. When the IRS files a tax lien, it means that you matter has been placed in active collections and you need to take action to avoid bank levies and wage garnishments. Usually bank levies and wage garnishments follow the filing of a tax lien by about 60 days.
  3. Tax liens will substantially damage your credit score. However, once the underlying tax problem is solved and the tax lien is released, your credit score will be substantially improved.
  4. Once a tax lien is filed, taxpayers have a right to Appeal the filing of the lien. The Appeal can be made on the basis that the tax is not due; or that the tax should be negotiated and settled; or that the filing of the tax lien will hamper your ability to pay the tax and as such, it should be released.
  5. There are two critical times in which to appeal the filing of the tax lien. The first critical time period is 30 days after the filing of the tax lien. Filing an appeal during this period of time will allow for judicial review if the initial appeal to the filing of the tax lien is not successful. The second critical time period is within 1 year after the filing of the tax lien. An appeal filed within 1 year of the tax lien will be heard by the Regional Board of Appeals, however, judicial review is not available.
  6. Once an appeal is filed, the IRS, in most circumstances will cease all collection action until the appeal is considered.
  7. Tax liens do not last forever. Usually, they expire after 10 years from the date the tax was assessed. It is possible that the ten year period can be extended if you have previously filed an Offer-In-Compromise or a Bankruptcy. If your tax lien is very old, it may be ready to expire soon and you then will not have to pay the tax due.

Need Help with Tax Lien?

Please feel free to contact us regarding your Tax Lien. Every tax matter is unique because every person’s situation is unique. We can quickly and efficiently analyze your circumstances and propose various options of resolution.

Call 310-285-3999 for a free, no-obligation consultation with a tax attorney, or fill out the contact form at the bottom of this page.

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Segal, Cohen & Landis will help you successfully resolve challenging federal and state tax problems including back taxes, audits, wage garnishments, and levies. We will negotiate your offer in compromise or installment agreement. Our IRS tax attorneys will take you through the resolution process to achieve your best possible outcome.