Tax Lien Tips

Tax lien is often placed on taxpayer’s property for the amount of debt as a security when the tax payer ignores the notice of payment due and doesn’t make payments on back taxes. Tax lien can be placed on debtor’s house, cars, and accounts receivable.  Tax lien becomes a public document that may affect the taxpayer’s credit score.

Before placing a tax lien, IRS sends a Notice and Demand for Payment, that if ignored is followed up with a Notice of Federal Tax Lien. IRS agents may also call the taxpayer in order to attempt to collect the outstanding debt. Tax lien is not same as Tax Levy as tax levy allows the government collects the property to pay the debt. Tax Lien allows the IRS to secure the debt against property. This means that when the property is sold, the proceeds go to the IRS first to pay off the debt, and then what is left goes to the property owner.In order to remove a tax lien, tax payer must either pay off the tax debt in lump sum or file Offer in Compromise that gets accepted by the IRS. If the taxpayer entersDirect Debit Installment Agreements and LiensThe IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). For taxpayers with unpaid assessments of $25,000 or less, the IRS will now allow lien withdrawals under several scenarios:

  • Lien withdrawals for taxpayers entering into a Direct Debit Installment Agreement.
  • The IRS will withdraw a lien if a taxpayer on a regular Installment Agreement converts to a Direct Debit Installment Agreement.
  • The IRS will also withdraw liens on existing Direct Debit Installment agreements upon taxpayer request.

Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored.

Installment Agreement the tax lien will be lifted after the debt has been completely paid off. Once the statue of limitations on the tax debt expires, the tax lien will be removed.
The best way to prevent and avoid a tax lien is to file accurate tax returns. But as soon as tax problems occur it is vital to not ignore them and contact a tax attorney right away. Tax attorney can help find the best solutions to settle the tax debt within taxpayer’s means.

 

Tags:

2011-08-22 11:00

11:00 am