Skip to Content
Call 24/7 for a Free Consultation

What is a Federal Tax Lien?

Serving Families Throughout Mobile

A federal tax lien is a legal claim by the United States government against a taxpayer's property because of unpaid federal taxes or other assumed debt. Federal tax liens are levied by the Internal Revenue Service (IRS) to secure payment of unpaid taxes. The IRS files a Notice of Federal Tax Lien when it has assessed a tax, usually sending out a bill for the amount due. Once they do not receive a response from the taxpayer within ten days, a lien is attached to the taxpayer's property. The lien applies to a variety of property types, including real estate, personal property, and financial assets. Federal tax liens are a matter of public record and may affect a taxpayer's credit score, making it difficult to obtain credit, sell assets, or find a job.

How a Tax Lien Can be Released

Once a tax lien is filed, a taxpayer will receive notice from the IRS outlining the amount of the lien and the steps they can take to release it.

The most common ways to release a federal tax lien include the following:

  • Payment in full: The simplest and most straightforward way to release a tax lien is to pay the full amount of the tax debt, including any penalties and interest. Once the debt is paid, the IRS will release the lien.
  • Offer in Compromise: An offer in compromise is a program that allows taxpayers to settle their tax debt for less than the full amount owed. If the IRS accepts the offer, the lien will be released.
  • Installment agreement: A taxpayer can negotiate with the IRS to set up a payment plan to pay off the tax debt over time. If the taxpayer complies with the installment agreement terms, the lien may be released.
  • Discharge of property: In some cases, the taxpayer may be able to discharge the lien from a particular property, allowing them to sell or refinance it.
  • Bankruptcy: Filing for bankruptcy may also provide relief from a federal tax lien, depending on the circumstances.

Filing an IRS tax lien represents one of the most serious collection measures that can be taken against you for non-payment or non-compliance with your federal taxes. A tax lien gives the federal government rights to all present and future assets you own until their claim is paid in full; this includes bank accounts as well as property like cars or homes.

7 Reasons Taxpayers Receive a Federal Tax Lien

There are several reasons why the Internal Revenue Service (IRS) might file a federal tax lien. In most cases, the IRS will have assessed taxes, sent out a bill for the amount due, and received no response from the taxpayer. By following the steps identified by the IRS, you can avoid this penalty and get on a path toward financial freedom.

If you received notification of a lien against your property, it’s likely due to one of the following reasons:

  • Failure to pay taxes
  • Filing a late tax return
  • Understating income or overstating deductions on the tax return
  • Making errors in calculating taxes owed
  • Neglecting to make estimated payments for self-employment earnings, investments, etc.
  • Not paying payroll taxes
  • Ignoring IRS letters and notices of back taxes due

The best way to avoid getting into any kind of trouble with the IRS is to be aware of your tax obligations and ensure you address them promptly. Confirm that you have filed all required forms on time, made all estimated payments, and are current on any previous debts or penalties. Additionally, if you ever find yourself in a position where you are unable to make a payment on time, seek advice from a tax professional or legal representative. You must consider other options, like making installments or discussing other financial support actions. Being proactive about your situation can help you avoid further issues and maintain your credit score.

Do You Need Legal Assistance?

It is important to remember that dealing with the IRS can be very complex and intimidating. If you ever find yourself facing a Federal Tax Lien, it is best to seek advice from a professional who can help you navigate your situation confidently and ensure that your rights are protected. Taking steps like these will help set you on the path to financial freedom and avoid any further issues with the government. IRS tax liens are serious and should not be ignored or taken lightly. Even after you pay off what you owe in taxes, having an unresolved IRS tax lien on file may limit your financial opportunities. Lenders are less likely to approve loans if they see unresolved liens on your credit report, and they could also increase their interest rates when they know that there’s a large debt owed to another creditor.

After you’ve paid off your debt, you may need to formally request the lien be removed from your record, which an attorney can handle for you. It’s important to remember that if you don’t take steps to resolve your tax debt, the IRS can continue to pursue collection measures, such as filing a federal tax lien. This is why addressing any outstanding tax issues before they become too serious and affect your credit score for years to come is important. Ultimately, resolving a federal tax lien is possible but requires a lot of patience and the right approach. Call (251) 241-5234 or contact us online to get started.