Question:
I just received a letter in the mail today from the IRS stating that they have filed a Notice of Federal Tax Lien against me in the county where I live. Can the IRS do this and how will it affect me?
Answer:
The IRS can file a federal tax lien against a taxpayer after three requirements have been met. The three requirements are:
- The IRS has assessed the taxes against you;
- The IRS has sent notice and demand for payment to you;
- You have either negligently or intentionally refused to pay the tax due.
Once the IRS has met these three requirements, a tax lien automatically arises against you, whether the IRS files it with the Register of Deeds office or not. This lien can really handcuff you and put you in a difficult position. The filing of the lien is a passive collection activity that is common with the IRS because it protects their interest in any property you own or purchase after the lien is in place, and it puts other creditors and potential creditors on notice of the taxes due. One problem that usually arises from the filing of a tax lien is the IRS files the tax lien with the credit bureaus. This usually makes it very difficult to obtain credit of any type.
This tax lien remains in place until the tax is paid in full or an offer in compromise is accepted and paid. Even if you are making payments each month to the IRS, the tax amount shown on the lien will not be changed. Therefore, if you initially owe $100,000 in back taxes, and you have paid $99,000, the lien will never be adjusted to show that you only currently owe $1,000.
If you have a federal tax lien filed against you and would like some assistance in resolving of your tax debt please contact me for a free consultation.