Has your credit been damaged? Are you having difficulties with buying or selling a home? Have you been unable to open new credit accounts or purchase a vehicle? If you’ve answered yes, you may have fallen victim to the IRS tax lien.
An IRS tax lien is where the IRS files a Notice of Federal Tax Lien against taxpayers who have not been fully paying their taxes. The action is the IRS’ attempt to collect back taxes from taxpayers by placing a lien on the assets of those taxpayers. The statutory lien that they file is public information and can be seen by credit reporting agencies.
Liens can be on homes, which makes selling them difficult. The IRS can also place liens on vehicles, alimony, computers, furniture, securities, and company receivables.
To resolve this problem, you want to set up a payment arrangement and possibly make a settlement with the IRS to pay less.
Options taxpayers have in dealing with the lien include:
- Pay the tax. Once tax owed is paid in full, the lien should be removed within 30 days and can also be erased from your credit report. Proof of payment is given through an IRS Certificate of Release of Federal Tax Lien. Keep in mind that partial payments don’t reduce the amount on the Notice of Federal of Tax Lien. The amount must be paid in full to get rid of the Notice of Federal Tax Lien.
- Reduce the tax and pay through an Offer in Compromise. The IRS may decide it’s not worth their time and efforts trying to collect the tax from you if you can’t repay it. In these types of situations, a repayment plan may be the way to go. To submit an Offer in Compromise, offer a payment to the IRS less than the full amount owed, and the IRS will either accept or reject the offer. If the IRS accepts the offer, you can pay the smaller amount that you offered in payment plans. Since the Offer in Compromise needs to be well-calculated and is not as simple it sounds, a tax professional can help.
- Temporarily remove the lien. Having the lien removed temporarily may be the best way to go if you can’t pay off the lien or don’t have the time to set up a payment plan with the IRS and need the lien removed to sell or refinance your home. The tax lien is lifted for the time it takes to sell or refinance your property. This is another case in which a tax professional could be of great help.
- Have the statute of limitations run out. A tax lien cannot be enforced after 10 years. However, the tax lien could be extended before it expires if the IRS decides to act upon the tax lien. Also, a tax lien can stay on your credit report permanently if nothing is paid to remove it.
To Get Started
If you want to find out the total amount due on your lien, call or mail the IRS providing your name, phone number, address, Social Security number, and date the amount on the lien should be calculated through. The IRS will send two payoff letters, one of which can be returned with your payoff amount that the IRS can put towards paying off your lien.
Make Sure the Lien is Removed
An IRS Certificate of Release of Federal Tax Lien is needed to get rid of the Notice of Federal Tax Lien. If you have paid off your lien but don’t have a Certificate of Release, get directions on how to request one by visiting the IRS website and searching for Publication 1450. Keep a copy of the Release of Federal Tax Lien for your own records.