When a taxpayer owes the government unpaid tax debt, the IRS can impose a federal tax lien. This lien serves as the government’s legal claim against the taxpayer’s property. It protects the government because the lien must first be paid before the asset can be sold with a clean title. The lien arises when the IRS assesses the taxpayer’s liability and sends a bill explaining how much the taxpayer owes. If the taxpayer does not pay the debt in full within the outlined time period, the IRS may then file a Notice of Federal Tax Lien to alert other creditors to the government’s right to the taxpayer’s property.
How a Federal Tax Lien Impacts You
A federal tax lien can affect you as a taxpayer in many detrimental ways. A lien can impact your:
- Assets. The lien attaches itself to all of your assets. These may include real estate, securities, or motor vehicles. The lien can also attach to future assets that you acquire during the duration of the lien.
- Credit. Unfortunately for those facing a lien, it may also impact your ability to obtain credit. This can make it difficult to carry out daily financial tasks.
- Business. A lien can also attach to all of your business property. This may include your rights in all such property, including accounts receivable.
- Bankruptcy. If you filed for bankruptcy, the tax debt and the Notice of Federal Tax Lien may continue even after the bankruptcy is over.
Facing a federal tax lien is an intimidating situation. Fortunately, you do not have to go through this alone. We encourage you to check out our client testimonials page today to learn more about how we can help.