How do I get off the Federal Tax Lien?

Most people aren’t aware of what happens if they don’t pay their taxes on time. Many assume that the IRS will give them a break or that they’ll just get a notice for the IRS wage garnishment without the ability to fight back. However, this is not always the case. According to a professional tax consultant, If you owe taxes and fail to pay your IRS back taxes owned, there can be severe consequences; this includes a federal tax lien.
What is a Federal Tax Lien?
A levy is a legal seizure of your property to pay a tax obligation. Levies are not the same as liens. A lien is a legal claim made on your property to ensure payment of your tax debt, while a levy takes possession of the property to repay the tax bill.
When you fail to pay your taxes, the government has a legal claim over your property in the form of a federal tax lien. The lien safeguards the government’s interest in everything of your belongings, including land, personal property, and financial assets.
In what ways does a tax lien affect you?
1. Tax Lien affects your borrowing capacity:
If you have a federal tax lien, it can be difficult to get rid of it. A federal tax lien is a public document that represents an unpaid debt. If you want to take advantage of new credit opportunities, lenders will likely consider you a “risky” borrower in their lending decision. This can make obtaining new loans or credit lines difficult. Furthermore, a federal tax lien claims your assets (such as your car), which could hurt your net worth calculation if you apply for a loan or other credit-based account.
2. A lien might prevent you from selling or refinancing your home:
A lien might prevent you from selling or refinancing your home. Whether you need to sell an item or refinance debt on a specific piece of your property, such as a house or automobile, having a lien placed on that asset essentially puts a stop to your efforts. Before selling or refinancing the property, you must pay off the outstanding amount, plus interest and legal expenses.
3. Tax Lien is not eliminated by bankruptcy.
When declaring bankruptcy, remember that you cannot discharge the tax lien. The lien is not released by bankruptcy and is released if the IRS agrees.
When you owe taxes, you should consult with an attorney to see if filing for bankruptcy is the right choice for you. They may also assist you in determining what material must be included in your bankruptcy petition for it to be examined by the court.
The myth related to Tax Liens
The biggest myth related to federal tax lien is that It could affect your credit score. Well, since 2018, this has not been true. Tax liens, or ongoing debt owed to the IRS, no longer show on credit reports and hence do not influence credit scores.
Before that, Tax liens were found on all three main credit agencies’ credit records. This might affect one’s credit score and ability to create new accounts. Tax liens are no longer included on credit reports but are still publicly available. This implies that a prospective creditor may (and most likely will) learn about a tax lien, which can be used to determine your creditworthiness.
How to remove an IRS Tax lien?
If you have outstanding federal taxes and have received a Notice of Federal Tax Lien, you have the following alternatives if you want to challenge the IRS’s ability to seize your assets for unpaid taxes:
1. Installment plan:
The first thing you should do is pay your tax bill. It may seem easy, but it works! In most cases, paying your taxes is the only way to prevent a tax lien or a tax levy. If you cannot make a payment immediately, don’t despair—you may get the IRS to remove the federal tax lien from public record. This is possible by consenting to an installment arrangement that automatically deducts money from your bank account over a period of time. (The payment in this installment may include interest and penalties.)
2. Offer in compromise:
The next step is to ask about making an Offer in Compromise. Remember that there are various requirements to follow and that the IRS normally accepts fewer than half of the applications it gets in a given year. All tax forms must be submitted, and all projected tax payments must be paid for the current tax year. The IRS will not accept your application if you are presently in bankruptcy or being audited.
3. Hire a tax professional to bargain on your behalf:
The IRS offers a variety of programs to assist customers in repaying their debt in installments or reducing the amount owing entirely via settlement agreements. As an example, consider the federal payment levy scheme. Regardless of their advantages, these systems cannot ensure effectiveness without expert guidance and understanding of the relevant laws and processes.
Conclusion
A tax lien can harm your net worth. As a result, it can impact your ability to obtain a loan and even secure housing. Because many employers conduct credit checks on prospective employees, an IRS tax lien can make it difficult to find work.
The good news is that releasing a federal tax lien is simple.
However, if you have an unfiled return or unpaid taxes, don’t panic! A tax lien can be removed with the assistance of an experienced tax attorney.