Tax liens are a common occurrence for many taxpayers. It can be a hassle for taxpayers, as they can prevent them from selling or refinancing a property until the lien is paid off. Fortunately, there are ways to prevent a tax lien from being placed on your property, as well as ways to deal with an existing lien.
What Is a Tax Lien
Tax liens are a type of lien imposed by the government on a property due to unpaid taxes. When a tax lien is placed on a property, the owner of the property is not allowed to sell, borrow against, or transfer the property until the taxes have been paid off in full. If the taxes remain unpaid, the government has the right to foreclose on the property. This ultimately leads to tax levies.
What Is a Tax Levy
A tax levy is a legal action taken by the Internal Revenue Service (IRS) to collect unpaid taxes from individuals or businesses. When a tax levy is imposed, the IRS will seize any assets that belong to the taxpayer, including bank accounts, investment accounts, real estate, vehicles, and other personal property. The IRS can also garnish wages, meaning that a portion of the taxpayer’s wages will be withheld and sent to the IRS.
What Are the Types of Tax Liens
There are two types of tax liens: federal tax liens and state tax liens. A federal tax lien is filed by the Internal Revenue Service (IRS) when a taxpayer fails to pay their federal taxes. A state tax lien is filed by a state government when a taxpayer fails to pay their state taxes.
What Does It Mean If You Have a Tax Lien
If the IRS imposes a federal tax lien, the next thing that can happen to an individual or business include:
- Costing You a Lot of Time. The taxpayer must take the time to contact the IRS and negotiate a payment plan or settlement. This can be a lengthy process, as the IRS is often slow to respond.
- Jeopardizing Your Refinancing or Home Sale. If the taxpayer has a tax lien on their home, it can make it difficult to obtain a loan or to find a buyer.
- Affecting Your Creditworthiness. The lien will appear on the taxpayer’s credit report, which can have a negative impact on their credit score.
- Leading You to a Tax Levy. Finally, as mentioned above, a tax levy is a legal enforcement action taken by the IRS to collect unpaid taxes. This could mean that the taxpayer’s wages, bank accounts, or other assets can be seized in order to pay off the debt.
How to Resolve a Tax Lien
If you’ve received a tax lien, it’s important to take action to resolve it as soon as possible. The first step is to contact the IRS or state government and make arrangements to pay your tax debt. You may be able to work out a payment plan or an offer-in-compromise, which allows you to settle the debt for less than the full amount. Once you’ve paid your debt in full, the lien will be released.
In addition to working with the IRS or state government to resolve your tax lien, you may also want to consider hiring a tax attorney or accountant to help you negotiate a payment plan or offer-in-compromise. They can also assist in filing any necessary paperwork and ensuring that your tax debt is resolved in a timely manner.
Conclusion
Tax liens can be a serious financial burden and can have a negative impact on a person’s credit score and financial health. If you’ve received a tax lien, it’s important to take action to resolve it as soon as possible. You may be able to work out a payment plan or an offer-in-compromise with the IRS or state government, or you may want to consider hiring a tax attorney or tax professionals to assist you in resolving your tax debt.
Are you looking for help with tax liens in Birmingham, AL? If so, then you should look no further than Axiom Tax Resolution Group. Our team of tax professionals is well-versed in the nuances of the tax system in Birmingham, AL, and we are here to make sure that you get the most out of your tax situation.
We understand how overwhelming and confusing the tax system can be. That’s why we offer a wide range of services to help you resolve your tax liens quickly and efficiently. Let us make sure that you get the best possible outcome for your situation. Contact us today to get started!
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