A Federal Tax Lien is a tough tussle for many businesses and entrepreneurs. When businesses or even individuals do not pay the tax they owe, the federal government pulls its own card and executes methods to recover the debt.
A Federal Tax Lien (which is also often known by the name of IRS tax lien) is a legal claim that falls under the IRS tax representation, enabling the lienholder to seize your property and assets in case you don’t fulfil a couple obligations. A Federal tax lien typically wreaks havoc, causing you to pay everything in place of the tax you did not.
The most impactful part of a tax lien is that it can jeopardise your property and assets, causing you to even lose them in case action is not taken sooner. Which also means that it disallows you to sell or give away your business, assets, real or personal property. Thus, in case you owe money to the IRS, you are going to hit financial hardship. The best way to avoid the same is by seeking a hand from a tax planning service just whenever found necessary.
But the good news is that it can be pulled out of your name from the records in case what you offer is legally approved. For example, if you divide what you owe in multiple payments, every month, or the timeframe they select – then your name will likely be cut off from the public records. In cases as dire as these, get help from a tax consultant company to clear the clutter you have in hand.
Liens vs. Levies
There are times when Liens and Levies become words people use interchangeably. While they might seem extremely similar, they are not in reality.
A Tax Lien is a document that the IRS files in order to safeguard the government’s ability to start collecting money. On the other side, a levy is a term used when there is forced collection of tax, typically by confiscating or seizing money directly out of a paycheck or bank. While the both are often used interchangeably, note that they are different in a variety of different ways.
How to Prevent a Federal Tax Lien?
Federal Tax Lien sounds unnerving in many ways. Learning about how federal tax lien can seize most things you possess is very unsettling. One of the best ways to prevent a Federal Tax Lien is to pay the amount in full before a lien is even filed by the IRS. However, the efficacy of IRS tax liens persists to be among the biggest debates in the tax practitioner community still on this day.
One of the other ways to prevent a lien is by setting up a payment agreement with the IRS that makes a couple arrangements for people who cannot meet the owed amount in one go. Note that the IRS is not going to file a federal tax lien in case the taxpayer sets up either a guaranteed streamlined instalment agreement or installed agreement.
On the basis of the amount due, you will have a few options open to pay the debt within a span of 180 days or by means of a long-term instalment agreement which consists of a set-up fee. However, be sure that you will continue paying interest or loops of penalties until the debt is paid in full.
Withdrawal of Federal Tax Lien
A withdrawal is applicable when the public Notice of Federal Tax Lien ensures individuals that the IRS is not competing with fellow creditors to claim your property. Regardless of every case, you are still liable for the due amount. One of the many options that enable withdrawal of the notice includes cases where,
- Your tax liability is satisfied, alongside the release of your lien. This generally comes in pair with your compliance for the past three years in filing – including all individual returns, information and business returns.
- You have been proven current on your estimated tax payments and federal tax deposits, as and when applicable.
The other way of withdrawal or release is when you have entered or have converted your regular instalment agreement to a Direct Debit Instalment Agreement.
- You qualify as a taxpayer.
- You owe the department $25,000 or anywhere less.
- You have been in full compliance with a variety of other filing and payment requirements.
These are among the handful of ways withdrawal or release can be commenced.
In every case, your tax balance is still going to accrue interest and also harvest penalties until the time it is paid off. However, if you allow the IRS to consider three consecutive payments every month from your bank account, you can potentially convince the IRS into pulling the federal tax lien out of your name from the public record. The fees can be anything between $0 to $225, on the basis of the plan and the income you generate.
What is Releasing a Federal Lien?
A tax lien is difficult to be released once they have been filed against the taxpayer. However, there can be days where a lien like this is dissolved by the IRS. Releasing a federal lien occurs when it does encumber the property anymore.
The County records are updated on a regular basis to reflect the liens which are released. Liens are generally declared “released” within 30 days, at the earliest, once the full payment of the outstanding tax obligations are met or if the payer has guaranteed or streamlined a further instalment agreement to process all the dues at hand.
The IRS placing a lien against the property you own is frightful. The consequences of having your name emboldened on their charts can be far-reaching time and time again. It is a fear of jeopardy that comes into question. However, with proper help, the fright can be pacified down. A Federal Tax Lien can be equally as difficult to pay off as is to encounter it on the first day. Many hassle down this road for months until they have paid the due in full.
The best and easiest way to avoid any dire situation like this is avoid it in the first place. However, if not, then let the professionals take care. The helping hand of a tax pro can legally help you move out of a circumstance as pressing as this.