[COLUMN] When the IRS files a federal tax lien

A NOTICE of Federal Tax Lien (NFTL) is a public record filed by the Internal Revenue Service (IRS) with the County Recorder where you live. When the IRS wants to enforce delinquent taxes against you, there are various mechanisms that the government can use to achieve that goal. This is one of them.

Technically, the IRS has a “secret lien” the moment that taxes are assessed, but this is between you and the IRS, and the public doesn’t know about it yet. But when the IRS makes the lien public by recording it, it puts creditors and everyone on notice that the government has a lien or a secured interest against your property. In other words, it tells everyone that you have an unpaid federal tax debt. Of course, filing the lien is not something that the IRS just does without prior attempts to collect. If you have received several collection notices and do nothing, this is the next step by the IRS to force you to pay. In other words, federal tax lien can be avoided by paying the tax in full before they are filed. But this is not always possible, especially if you owe a large amount.

The federal tax lien could have negative effect on your finances and your credit. Until the underlying tax debt is resolved, it would be difficult to remove the lien. By having a lien on your property, it would also be very difficult, if not impossible, for you to purchase a home, refinance your mortgage, and purchase things on credit. While the credit bureaus stopped reporting tax lien information on your credit report in 2018, the IRS still makes tax liens a matter of public information. If lenders, landlords and employers find out about the lien, they may use that negative information against you if you are applying for a loan, a house or apartment rental, or a job.

If you have just received a notice of federal tax lien, the notice will tell you that you can generally apply for a “Collection Due Process” hearing where you can have your side of the story heard and possibly dispute the validity of the tax lien. And if the hearing does not work out in your favor, you can also typically have another chance to do so in tax court. However, the request for such a hearing needs to be filed in a timely manner. Read the letter carefully as it will tell you exactly how much time you have.

Now, you may ask: What are my options in resolving the federal tax lien once I get the notice from the IRS?

Of course, you can always pay the full amount of the tax debt and resolve it quickly. That’s a no-brainer. But what if you cannot afford to pay the full amount?

If you qualify for an Offer in Compromise, you will be able to settle the outstanding debt for less than full amount. If the IRS accepts your offer, the lien will be released. Whether or not you qualify for this program will depend on your income, the value of your assets, and the amount of time remaining under the IRS 10-year collection statute. The IRS uses a specific formula to determine eligibility and requires very detailed financial disclosures.

Another method is to ask for an installment agreement that allows you to pay off what you owe over time. If you abide by the terms of the agreement, the IRS may release the lien.

In some cases where the only way to pay what you owe is to refinance your property, the IRS may allow you to subordinate their tax lien to your new loan so that you can access the equity in your property to pay the IRS.

All of the above is general information and my purpose is to simply provide you a quick overview of options that may be available. The tax lien is one of the most serious collection tactics used by the IRS because it gives the government rights to all your assets until they collect every penny that you owe. Therefore, DO NOT ignore the notice under any circumstances as doing so may cause you to lose legal rights that you perhaps didn’t even know existed.

If you owe the IRS, the State, EDD or State Board of Equalization, my office can help you find the best solution to resolve your tax liability. You will never have to speak with the IRS again. I will review your case and help you make the best decision for yourself and your family.

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The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of the Asian Journal, its management, editorial board and staff.

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray J. Bulaon has successfully helped over 6,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE  1-866-471-8272.

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