What Is a Tax Lien and How to Get a Fresh Start
The news that the IRS has placed a tax lien on your property can be a terrifying experience. A tax lien is a public record, a legal claim to your property, and it can affect every aspect of your financial life. It can damage your credit score, prevent you from selling or refinancing your home, and make it difficult to get a loan. For real estate agents, it can be a devastating blow to your business and your reputation.
The good news is that a tax lien is not the end of the road. You can, and should, take action to get it released. At Infinity Resolution, Principal and Enrolled Agent Michelle Hiller helps individuals and small business owners in the Houston, Texas area resolve their tax liens and get a fresh financial start.
What Is a Tax Lien?
A tax lien is the government's legal claim against your property when you neglect or fail to pay a tax debt. It is a public record that notifies other creditors that the government has a legal right to all of your assets, including your real estate, personal property, and financial accounts. A tax lien is different from a tax levy, which is the actual seizure of your property. The lien is a claim to the property, while the levy is the act of taking it.
In Texas, the state tax code specifies that a tax lien attaches to a property to secure the payment of all taxes, penalties, and interest imposed for the year. This means that if you don't pay your taxes, a lien can be put on any property you own, from your home to your personal business assets.
The IRS Tax Lien Process
The IRS doesn't place a tax lien on your property out of the blue. A federal tax lien comes into existence automatically once the IRS assesses a tax, sends you a bill, and you fail to pay it. The IRS then files a public document called the Notice of Federal Tax Lien (NFTL) in the public records of your local county, such as Harris County, to alert other creditors.
The NFTL is a public record, so lenders, potential clients, and even employers can find it. For real estate agents and others who rely on a strong financial reputation, an NFTL can be particularly damaging. A tax lien can remain on your credit report, making it difficult to get a mortgage, car loan, or business financing.
How to Get a Tax Lien Released
The fastest way to get a tax lien released is to pay the tax debt in full. Once the IRS receives payment, they are legally required to release the lien within 30 days.
However, paying the debt in full may not be a possibility. Fortunately, there are other options to get a tax lien released or to manage it.
Offer in Compromise (OIC): If you are in a difficult financial situation and can't pay the full tax debt, you may be able to settle it for less than you owe through an OIC. If the IRS accepts your OIC and you meet the payment terms, they will release the tax lien.
Subordination: A subordination does not release the lien, but it allows other creditors to move ahead of the IRS in priority. This can make it possible to refinance your home or get a loan, as the new lender will have a higher claim to the property than the IRS.
Discharge: A discharge removes the lien from a specific piece of property, such as your home. The lien will still remain on your other assets, but it will be removed from that particular asset. This can be a useful tool if you need to sell a property to pay off the tax debt.
Withdrawal: A withdrawal removes the public NFTL from your record. This can be a good option if you've entered into an installment agreement with the IRS and have a history of good tax compliance. The withdrawal removes the public notice of the lien, which can help repair your credit score.
The Cost of Waiting and the Power of an Enrolled Agent
Ignoring a tax lien will only make the problem worse. The longer a tax debt goes unpaid, the more penalties and interest will accrue, and the more aggressive the IRS will become. In a worst-case scenario, the IRS can proceed to a tax levy, seizing your wages, bank accounts, or even selling your property to satisfy the tax debt.
An Enrolled Agent is a tax professional who is federally licensed by the U.S. Department of the Treasury to represent taxpayers before the IRS. Michelle Hiller, EA, has over 29 years of experience in individual and business taxes, as well as an extensive knowledge of Texas tax law. She has the expertise to help you understand your tax lien, determine the best course of action, and negotiate with the IRS on your behalf.
Don't let a tax lien control your life. Contact Infinity Resolution in Houston, TX, at (281) 796-1143 for a confidential consultation today.