Tax liens are among the most powerful tools in the arsenal of the IRS when it comes to collecting debts. If the IRS puts a tax lien on your property (your house, your car, even your bank account), this means that you can no longer sell, access, or borrow money against that asset until your tax debt is paid in full. What’s more, a lien is often followed by a levy, which means that the IRS actually seizes your property and sells it off!
Tax Liens Are Only Imposed After Sufficient Warning by the IRS
If you owe at least $10,000 to the IRS, the government won’t immediately seek to attach a lien to your home or other property. First, the authorities have to notify you in writing about your tax debt, and give you the opportunity to pay the debt in full or via a payment plan worked out with the government. If you ignore these warnings, or don’t respond with sufficient gravity, the IRS will eventually send you a Notice of Federal Tax Lien, which means that your property has already been “encumbered” and is essentially out of your direct financial control.
As bad as it already is, a tax lien can have further negative consequences for your finances. For example:
- Having a lien on your property will make it nearly impossible to secure credit or additional loans.
- If a lien is attached to your house, no one will want to buy it (since buying a house with a tax lien on it means that the new owner assumes the debt).
- You won’t be able to distribute property to your spouse or other relatives (that’s the reason the IRS has “encumbered” it in the first place, so you can’t sneakily dispose of your assets and avoid paying your tax debt).
A lien is not the last step in the IRS collection process. If having a lien attached to your property doesn’t jolt you into paying your tax debt (and any penalties), the government can then move to actually seize, rather than encumber, your house, car, bank accounts, or other possessions. What this “levy” does is allow the IRS to auction off these assets to the highest bidder, hopefully generating enough money to cover a significant portion of your unpaid debt.
You Need to Hire An Experienced Tax Lawyer Before, and Not After, the IRS Imposes a Lien
If the IRS has imposed a lien on your property, that means that the government has already sent you numerous warnings about your unpaid tax debt—at which point you should have hired an experienced tax lawyer to negotiate your way out of trouble. If you’re facing a tax lien, call the law firm of Travis W. Watkins, PC for a free consultation; we will do our best to negotiate a mutually acceptable payment plan with the IRS revenue officer.