Commonly Asked Questions and Answers About Tax Liens
What Happens If the IRS Issues a Tax Lien on Your Assets?
When the IRS or State places a tax lien on a taxpayer’s assets, they have a legal claim against their property due to unpaid back taxes. This tax lien ensures the IRS or State will be prioritized over other creditors to the taxpayer’s assets. The tax lien typically is placed upon a home, but can also be placed on a business or car.
How Long Does an IRS or State Tax Lien Last?
A federal or state tax lien lasts for 10 years from the date the tax was assessed, unless: 1. The IRS or State renews it. 2. The balance is paid in full. 3. Other conditions are met to remove or lift the lien.
How Do I Remove a Lien From the IRS or State?
Removal of a tax lien requires the tax debt to be paid in full, or for a settlement to be reached with the IRS or State, typically through a Certificate of Subordination, Fresh Start Initiative, or Offer in Compromise. When those conditions are met, the lien will release within 30 days.
How Does the IRS File a Tax Lien?
First, the taxpayer will receive bills of a tax debt. They will eventually receive IRS Letter 3172 which notifies them that Form 668(Y) was filed and a lien will be placed on their assets. This public document, the Notice of Federal Tax Lien will alert creditors of the government’s legal right to your assets, along with some employers.
Is a Federal or State Tax Lien Bad?
A tax lien can have significant financial consequences, such as preventing you from selling or refinancing property, lowering your credit score, and gives the government the right to seize your assets. It can also affect one’s ability to get a job, loan, or start a business. A tax lien should be taken seriously.
Can the IRS or State Take Ownership of a Taxpayer’s Home?
In extreme cases, yes. The IRS can take ownership of a taxpayer’s home if they do not arrange to pay their debts. The tax lien gives the IRS or State the right to seize the property if arrangements or other conditions are not met.
How Does a Tax Lien Affect a Taxpayer’s Credit Score?
While the three major credit bureaus no longer include tax liens in credit reports, tax liens are still a matter of public record and can hurt a taxpayer’s chances of getting a mortgage or loan. Lenders often search for tax liens as part of their due diligence when evaluating a taxpayer’s credit or loan application.
What is Tax Relief?
Tax relief is the settlement, dismissal, or forgiveness of taxes that are owed to the IRS or State. A tax lawyer or Enrolled Agent typically represents a client on behalf to the IRS, and then negotiates down a tax balance that may have got out of hand for the taxpayer. While the IRS or State may try to introduce audits, fines, liens, levies, garnishments, public auctions, and interest payments for taxpayers who fall behind on their taxes, tax relief is achieved by professionals utilizing the 1,700 pages of tax code to help their clients find relief due to their circumstances.
Can the IRS or State Seize a Taxpayer’s Assets?
The IRS or State garnish, levy, or seize almost any taxpayer’s assets, including the money in their bank account (along with any future deposits), their income from their employer, their real estate, retirement accounts, pension plans, social security, passport, driver’s license, and more.
Does Tax Relief Take a Long Time?
Some issues could be resolved in a matter of a few months, while others may take years to resolve. It really depends on the complexity of the case, the balance and how many years it covers, along with how many liens, levies, garnishments, penalties, fines, and interest are issued, how current the taxpayer is in filing tax returns, and any other moving parts are involved.
How Do Tax Relief Services Work?
Tax relief companies either go after the tax balance owed and try to eliminate most, if not all of it, or they just set up a payment plan for the client (which the taxpayer can easily do on their own).
Most tax relief companies focus on a payment plan that doesn’t help the average taxpayer who falls behind on their taxes, whereas, at Coast One Tax Group, we go straight for the balance that is owed and work to eliminate as much of the back tax debt as possible, with many of our clients finding relief as they typically are seeing up to 93% or more in savings. In many Coast One cases, a taxpayer may have a five-, six-, or seven-figure tax balance brought down to a few hundred to a few thousand dollars.
The tax relief process typically works like this. A team of tax experts meets and investigates a taxpayer’s tax situation to determine what major tax issues they are facing, along with which solutions have the best chances of success.
Strategies can include an offer in compromise, penalty abatement, innocent spouse relief, injured spouse relief, or claiming currently not collectible status. Once a strategy is chosen, Enrolled Agents, CPAs, and tax attorneys negotiate with the IRS or State until a resolution is met.
How Do You Qualify for Tax Relief?
Whether tax relief is achievable or not is determined by doing an equation of income, assets, expenses, hardships, tax debt, penalties, interest, fees, and the type of tax debt.
Typically, taxpayers that owe the IRS or State more than they can afford to pay will usually qualify for a tax relief program, as long as they are up-to-date with filing their tax returns (which we can handle as well).
After doing tax relief for 17 years, Coast One Tax Group is able to accurately assess whether a taxpayer qualifies for tax relief after a free 10-minute consultative phone call.
What is the IRS Fresh Start Program?
The Fresh Start Initiative is a group of separate IRS programs designed to help taxpayers resolve their tax issues. They consist of: Offer in Compromise (OIC), Economic Hardship Partial Payment Plan, Currently Non-Collectable (CNC) Status, Installment Agreement, and other programs.