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Tackling Tax Liens and Avoiding Trouble With The IRS

Yara Zakharia, Esq.

Each year, millions of Americans owing back taxes find themselves entangled in the Internal Revenue Service's web known as tax liens. Both the state taxing agencies and the IRS relentlessly pursue back taxes, and they do so through the mechanism of a tax lien. To secure the payment of taxes, those entities impose property tax liens by levying on delinquent taxpayers' assets and property. Since tax problems do not dissipate of their own accord, it is imperative that taxpayers assume a pro-active stance and tackle the situation head-on. Taxpayers who are slapped with a real estate lien have numerous remedies and compliance methods at their disposal, and those are addressed in this article.

The federal government may file an IRS tax lien against individuals who fail to pay their federal taxes (income, estate or gift taxes). In most jurisdictions, a county tax lien as well as a state tax lien may also be issued on the property of those who default on their real property taxes. A tax lien, whether municipal, state or federal, attaches to all title, interest, and rights of taxpayers. Some of the adverse consequences resulting from property tax liens include the following:

  • It tarnishes a taxpayer's credit report and makes the attainment of high credit score a very difficult task;
  • It makes it difficult for taxpayers to sell their properties or buy real estate
  • It complicates matters for individuals seeking to purchase a vehicle
  • It can subject the taxpayer's property to seizure and foreclosure sale
  • It can lead to bank account and wage garnishments, which in turn prevent individuals from freely accessing their funds.

By wiping out their tax debt, consumers will be able to eliminate the tax lien. There are a myriad of effective methods available to taxpayers seeking to ensure compliance with the IRS and its regulatory counterparts on the state and local level, and they are as follows:

1) Consulting a qualified tax lawyer:

An experienced tax attorney can be an extremely powerful tool in the issue-resolution process involving the IRS. They may assist taxpayers in all legal issues relating to removal or release of a federal tax lien. The process works as follows: The lawyer drafts a legal document known as the Release of Federal Tax Lien, which is signed by an IRS representative attesting that the debt amount has been satisfied and stating that the debtor is released from any further debt. In order to obtain the removal of a federal tax lien, however, tax-debt relief is a priority. Therefore, the tax attorney will negotiate, on behalf of his client, with the IRS and reach some form of settlement. For instance, the lawyer might help his client obtain special loans to pay off the IRS tax lien or make arrangements for payment. Furthermore, tax attorneys could persuade the IRS to subordinate its tax lien to a creditor, thus enabling their clients to borrow funds against their assets to pay off all or a portion of the federal tax lien.

2) Discharging tax debts through bankruptcy:

By filing for bankruptcy protection, individuals can succeed in discharging some taxes.

3) Settling of IRS tax debt through an Offer in Compromise:

Taxpayers can pay off their tax debts for a sum lower than the amount due by entering into an Offer in Compromise. A tax attorney may facilitate such payment arrangements with the IRS and also push for affordable installment agreements. By paying the amount that is owed in an expeditious and timely manner, taxpayers will avoid any additional fines or problems.

4) Requesting an abatement of penalties:

In a majority of cases, individuals may eliminate tax debt or liens by obtaining an abatement of penalties.

5) Applying for federal tax lien forgiveness:

Citizens finding it impracticable to pay off their tax debt can apply for one of four tax debt forgiveness programs offered by the IRS.

6) Petitioning for tax amnesty:

Individuals can participate in temporary programs offered by state governments, permitting them to file their taxes late with decreased penalties and to pay back taxes.

7) Applying for a discharge of an IRS tax lien:

Persons who plan to sell their home may apply for a Certificate of Discharge, which releases the effects of a tax lien against one piece of real estate.

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Date: 11/8/2009 5:24:40 PM
If michigan places a tax liens for back taxes and you paying the installments do they have to remove each lien as its paid off? be cause the stae of michigan told me they will not until the entire balance is paid ....the liens are filed by year