Every year, citizens are required to file federal and state taxes by the deadline of April 15.
Taxes help cover vital infrastructure like roads, schools, and emergency services.
There are penalties for not filing your taxes on time. The worst situation you can put yourself in is refusing to file taxes, even if you are afraid and wondering how you will pay back taxes. Consequently, step one is to make sure you file taxes on time, and catch up on any delinquent filings.
Step two is to ensure that your tax returns are filed correctly with the proper calculations. Taxpayers may take advantage of applicable deductions and other tax breaks to reduce liability. Regardless, you may end up owing the federal government money once the returns are complete.
Wage earners generally have the appropriate withholdings withdrawn from each paycheck. Conversely, independent contracts and sole proprietors need to report their earnings at the end of the year and are usually subject to pay quarterly estimated tax payments.
If you fall into the latter category, you will likely owe the government money. Taxes that you have yet to pay back represent debt you owe to the IRS. It is your responsibility to pay back taxes, though there are solutions that exist for individual and business tax payers struggling to resolve tax debt.
How Do Liens Work?
A lien is securing the governments position for tax debt owed. Similarly, a lean may be placed on your car while you pay off the loan. The lender, known as the lienholder, has a claim over the property before anyone else.
Tax liens are particularly cumbersome because the government can have first rights to your business, home, or assets before any other lender. The federal and state government may enforce a lien to resolve tax debt.
Tax liens are oftentimes problematic that make the sale of an asset a bit more challenging, For example, in most states, a sale cannot be completed until the lien is discharged (or the tax debt gets settled).
Liens can be placed on physical property like land or buildings, as well as personal property like a car or equipment. Tax liens are one of several collection tools that the IRS and/or states utilize when a tax debt exists.
Liens are public notices that inform others that a debt exists and may encumber property and assets. Tax liens can be damaging to your credit score and can also inhibit you from securing new financing , since lenders are naturally more hesitant to provide loans to individuals and businesses with a tax problems and liens.
Consequently, liens make it exceedingly difficult for small business owners to continue to be successful.
What Happens When a Lien Is Placed on Your Home?
The IRS is generally required to notify you of unpaid taxes. You have opportunities to resolve the tax debt and prevent collection action. If you continue to avoid a resolution or ignore the IRS altogether, the taxing authorities will likely pursue forced collection action.
Liens are damaging to homeowners because they indicate that there is debt owed and make qualifying for a new loan or selling the property a bit more challenging.
Before things escalate, you should consult a tax professional to address the lien.
The Dangers of a Tax Lien
Federal Tax Liens give the IRS a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after the IRS assesses the liability.
You will be sent various collection notices from the IRS. Eventually, the IRS may file a lien if you do not respond, the IRS collection actions may continue. This may ultimately lead to additional headaches that could be otherwise avoided by taking a proactive approach.
By filing a notice of lien, your creditors are publicly notified that the IRS has a potential claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable if you are a business).
Types of Liens
Here are some types of non-consensual liens:
Local, state, or federal governments may put a tax lien on your property. This is the result of failing to pay back taxes you owe to the government. The lien gives the government a security interest in the property, which needs to be paid off before you can sell the asset. It also hampers your credit score and makes qualifying for a new loan even more difficult.
Is a Lien a Debt?
A lien is technically a claim or legal right against assets that are typically used as collateral to satisfy a debt. Therefore, a lien is technically not a debt, but a legal way for a lender to approach and hold your assets because of unpaid debt.
“Greg, Lance, Stephanie and team are some of the most amazing people I’ve had the pleasure of working with! They are on point when it comes to helping our crew out with our IRS tax issues! They saved our company and the owner so much money already! Thankful for Levy & Associates!!”– Erica Dell
“I had an IRS issue that no one was able to help me with. Someone recommended that I call The Levy Group so I did. They helped me with resolving a very difficult situation. I very thankful with what they were able to accomplish.”– David Carpenter
Levy & Associates – Strong Defense Against Tax Liens
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. To overcome these challenges, you must work to resolve your tax liability as quickly as possible before lien filing becomes necessary.
It is critical to contact Levy & Associates before the lien is attached to your property. You do have appeal rights when a lien is filed, but these must be exercised within 30 days of the notice filing date. If the lien has already been attached to your property, we can contact the IRS and determine the best course of action. Time is of the essence, so be sure to reach out as soon as possible.