If you do not pay the Internal Revenue Service within 10 days of their notifying you for payment, they have the right to place a Notice of Federal Tax Lien, which gives them legal ownership over your property as payment for the tax debt.
The tax lien certificate gives legal claim to the IRS over all your property, as well as removing your rights to the property. They notify your creditors of the lien, which may have an adverse affect on your credit. Creditors are notified to establish the IRS’ priority in the event of bankruptcy or sales of real estate.
Should this occur, there are steps you can take in order to have the lien released. The lien remains in place until you take action to have the lien released, withdrawn or appealed.
Release
The IRS will release the Notice of Federal Tax Lien if you satisfy the tax due including interest and other fees within 30 days by paying the debt or having it adjusted, or if the IRS accepts a bond you submit which guarantees payment. It is important to remember the IRS may not be the only government organization to contact to have the lien released. There may be other state or local fees.
It is also important to note the full amount of your lien will remain public record until it is paid in full, including all accruals and additions.
Discharge
If you decide to give up ownership of the property, such as selling your home, you may apply for a Certificate of Discharge for each piece of property a lien has been placed against.
Withdrawing Liens
You can file a notice to have the lien withdrawn in certain cases including:
- Notice filed too soon
- Notice not filed according to IRS procedures
- You have entered into an installment agreement to pay the debt
- It will make it possible to collect the debt more quickly
- It is in your and the government’s best interest
Appeal the Lien
The IRS is required to notify you in writing in five business days or less after the lien is filed. The noticed can be served in person; left at your home or business; sent by certified or registered mail. You can request to have an IRS case manager review your case and request a hearing by the IRS’ office of appeals.
You are eligible to have the lien appealed if:
- You paid in full before the lien was filed.
- Your taxes were assessed and the lien filed while you were in bankruptcy
- The statute of limitations expired
- The IRS made an error in assessing the tax debt
- You were not permitted to dispute the liability
Extreme Cases
In very serious cases, the IRS may seize your property, if it is believed monetary value can be obtained from your asset. If it is more than 20 percent, your property most likely will be taken and sold at a tax lien auction for payment of your debt. This only happens in the most extreme cases or ongoing tax debt.
The IRS is also allowed to issue a bank levy if necessary, which funnels the money in your bank account directly to the IRS. When this occurs, all of the money in all of your accounts is removed by the bank and given directly to the IRS until your debt is paid.
Before a lien is placed against your home, a tax audit may occur. In this case, it is extremely important to find out the results immediately and begin securing funds to turn over to the IRS. Preventing a lien on your home or other property is of the utmost importance.
Tax law is extremely complex and if you believe a lien was placed against your home in error, or if you do not understand the lien, it is advisable to retain the assistance of a tax attorney who can help lead you through any of these processes.