Federal Tax Lien – Know How to Deal With It

Do you owe taxes to the IRS? If these taxes have been carried forward for years, IRS can put lien on your property, car, boat and other valuable assets. This way IRS claims its money. Tax lien can be put on anything and everything you own. Tax lien also covers the interest and penalties on the taxes you owe. IRS would not put lien without any intimation. First of all, they will send you a valid tax bill and in an event of failure, they would send written notice with information to pay the remaining taxes.

The notice you would receive is known as CP-501 notice and officially known as Notice of Federal Tax Lien. The deadline will be mentioned on the notice and if you can’t pay in time or do not contact IRS at all, tax lien will be there. Moreover, IRS would file notice in the public records as well which is enough to spoil your credit ratings. Some people that they don’t own a property therefore, IRS cannot put lien or report it to the public reports. However, it is just a myth. IRS would never check whether you have a home or not they will just report it to the public reports that you owe money to the IRS. It could affect your future very badly. This is because recorded notice of federal tax lien tells everyone that you owe to the IRS. If anyone is pulling your credit report out or search through the public records notice of federal tax lien will show up on your records.

If you are applying for a loan to buy home or a car, recorded tax lien will spoil everything. It is because lenders or creditors will not approve the loan before checking your credit report but it has a recorded tax lien. So, it is almost impossible to get loan. Credit reporting agencies such as Experian, TransUnion and Equifax pick up tax lien very quickly. Apart from recorded tax lien there is another type of tax lien which is known as automatic or statutory tax lien. There is a difference between these two.

In order to get rid of automatic tax lien, you would need clear tax amount including interest and penalties. You can make use of tax debt relief options to reduce the tax amount or make use of offer in compromise or other provisions to get rid of automatic tax lien. In case of an automatic tax lien, it would not appear in any public record. Therefore some people call it silent or secret tax lien. If IRS put lien you have a right to appeal against it. You would need to file an application in IRS Appeals Office and request a conversation with the manager. For further escalation, complete Form 9423 and send it to the collection office.