Dealing with a Federal Tax Lien

Chad Silver

Chad Silver

Managing Partner of Silver Tax Group, author of the book "Stop the IRS". Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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The Internal Revenue Service is among the most powerful collection agencies in the world. And one indication of the authority of the IRS concerns its ability to attach a lien to your belongings.

The IRS defines a federal tax lien as the “government’s legal claim against your property when you neglect or fail to pay a tax debt.” This can apply to property such as your home, business, business interests, cars or trucks and a number of other assets you own. According to the IRS, such liens exist when the agency determines you owe a balance, you receive a bill explaining what you owe, and you allegedly refuse to pay the amount owed in a timely fashion.

The IRS does provide certain options regarding handling of liens, however. This can include:

  • A discharge that removes the lien from the specific property: There are a number of IRS provisions that dictate how such a discharge needs to take place.
  • The subordination process: Though subordination will not remove the lien, it does allow for the placing of other creditors ahead of the IRS regarding the payment of debt.
  • A withdrawal: This is a process that allows for the removal of the public notice of the federal tax lien. A withdrawal can occur if you are compliant with tax filings during the past three years, and you are current on estimated tax payments. A withdrawal may also occur if you enter into an installment agreement with the IRS regarding tax debt.

The best way for Michigan residents to avoid tax liens to begin with is to keep current on all tax payments. However, misunderstandings sometimes arise and life circumstances sometimes get in the way of your being able to pay your taxes.

When facing a tax lien, it is often extremely helpful to seek the assistance of an experienced tax attorney. The worst thing you can do is to ignore the tax lien. The lien and the tax debt will not go away by itself. Also, you risk paying more in penalties and interest. An attorney can help you sort through your options.

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