What is a Tax Lien?
The Internal Revenue Service frequently files tax liens (federal) against taxpayers with unpaid tax obligations. Federal tax liens are documents that are filed with county governments (often where the relevant taxpayer lives or conducts business) informing the public that the taxpayer owes money to the IRS.
Liens are attached to a taxpayer’s property (both personal property and business property). This means that the IRS will have first dibs on the proceeds of your property such as your home or car. The tax lien can also impair your crediting rating.
However, the good news is that you can remove the IRS lien by following these strategies.
Eliminate Your Tax Debt
You can eliminate your debt with an installment payment plan or by negotiating a settlement with the agency, like an Offer-In-Compromise. You will receive a certificate of release from the agency after you have paid off the IRS debt. However, if that doesn’t work out, you will have to be more proactive. For example, you can file Form 668(Z).
It is also important to contact local counties and credit agencies to inform them that your IRS tax lien has been released. Still, there is one hitch. Although the release implies that the IRS tax lien will not impact the disposal of an asset, keep in mind that the filing would still appear on the credit report! And that can last for up to seven years from the date of filing.
You have a number of rights when it comes to IRS tax collection process. For instance, you have the right to receive notices and enough time for resolving the matter. In case of a lien, you can appeal an action against the IRS. The good news is that this process is fairly simple like you can appeal with a phone call, simple.
However, in case this doesn’t work, you could request an official appeal and file Form 9423. That being said, it is vital to remember that your chances of prevailing are very slim. But you should definitely give it a shot in case you have a compelling case. For example, if the tax lien will make it almost impossible for you to repay the IRS debt, an appeal could be worth it.
Fresh Start Program
In the wake of the financial crisis, the IRS launched its Fresh Start Program. The program was geared toward taxpayers with debts of $25,000 or less. The IRS will withdraw the federal tax lien if you meet specific requirements. The slate will be wiped clean like it never existed!
Some of the requirements include:
- Resolving the tax debt
- Complying with all your current tax filings
- Staying current with estimated tax payments
If you satisfy these requirements, you would send Form 12277 to the agency. And if they agree, they will file Form 109169(c) with the relevant county office.
Have questions? Call Venar Ayar.