When you fail to pay a tax debt, you get a federal tax lien. A federal tax lien is a government’s legal claim against your property when this happens. The tax lien is attached to the property. If you have a federal tax lien, how will you remove it?
How to Remove a Federal Tax Lien
A federal tax lien will be removed if it’s filed in error, when the outstanding balance is paid in full, or when the balance is satisfied through a compromise. Furthermore, a tax lien can be removed if it’s unenforceable, which happens if it’s expired as a result of a 10-year statute of limitations. Here are two ways to remove a tax lien:
- Withdrawal: Withdrawal occurs when the IRS determines that it’s been filed in error, which sometimes happens when the wrong taxpayer is targeted for a debt. If you think you have been wrongly targeted that incurred a lien, you should get in touch with the IRS. An agent will then review your account. There is also a Fresh Start Program that allows taxpayers for lien withdrawal. However, there are eligibility requirements for this.
- Release: Release of liens happens when you pay your outstanding balance. Following the full payment or setting up a guaranteed installment agreement, it will take up to 30 days for the lien to be released. The IRS can also release a lien if it means it would speed up tax collection. The Fresh Start Program enables release for taxpayers if their outstanding balance is below $25,000. Therefore, if you’re looking for a lien release, you can reduce your balance by transferring some tax to a credit card, home equity line, or make payments to reduce your balance.
Why You Should Avoid Federal Tax Lien
A federal tax lien can impact your credit, which is why it’s not something you can brush off. Although it’s no longer a public record and it won’t show up on your credit report, the IRS can turn it into public information. When this happens, lenders, landlords, and even potential employers may use this to judge you, and we know that it’s not likely going to be a good one.
How to Prevent a Federal Tax Lien
Prevention is the best cure, so why not be proactive in preventing a federal tax lien? The easiest way to do this is to pay the tax in full before a lien is filed. However, if you can’t pay the entire amount, you can set up an installment agreement with the IRS. Keep in mind that the IRS won’t approach you to discuss your installment options—you have to come to them.
Finally, the best way to prevent this is to bring down your balance below $25,000.
Once the IRS files a federal tax lien under your name, you’re left with only a few options to get out of it. So, why wait for that to happen? Or if it already did, you can seek professional help to get you out of this “tax” rut! Do everything you can to get out of a federal tax lien because it’s going to be a huge inconvenience in the future.
Birmingham-based Axiom Tax Resolution Group offers tax relief help to all our clients. We can strike a deal with the IRS to pay off your tax debt over time before they come after your assets. Contact us today to get started!