If you owe the IRS or another tax collector enough money, they can place a lien on your property. Even if the lien is removed, it can still have a severe affect on your credit and your life. Here are a few of the negative side affects that can arise because of a lien.
- If there is a lien on your house, you usually will not be able to sell your home until the lien is removed, and you also may be unable to obtain a mortgage or a home equity loan in the future. If you wait too long, your home may be sold out from under you to cover your debt.
- Your credit takes a huge hit when you have a lien, for several reasons. Unfortunately there is no way to predict how far your credit score would fall, should a lien be placed on your property, because credit score companies don’t provide an equation. By taking the methods that credit score companies use to calculate your score, though, you can foresee how much your number would be affected. 35 percent of your credit score is payment history, which is the most heavily weighed area; 30 percent is debt-to-income ratio; 15 percent is the length of your positive credit history; 10 percent is the mix of credit types you have; and the final ten percent is the number of new credit applications you’ve recently filled out. Liens would fall under the first and largest category.
- If you do receive a lien, make sure to call a tax attorney immediately. The sooner you call, the better they are able to get you the best tax resolution possible through an offer in compromise or another solution.