When the IRS gets serious about collecting a tax debt, they can take numerous actions to recover the debt. One such action is filing a property lien against an asset like a car, motorcycle, home or other property.
In this article, we’ll be covering the topic of how to stop a property lien from the IRS before it is filed, and we’ll also mention some things you can do if the lien is already in place and you want to have it lifted.
Before we jump into the specific actions you can take, it will be helpful to take a look at what an IRS property lien is and how it is typically placed against an asset.
How IRS Property Liens Work
Let’s define our terms here. An IRS property lien is a legal claim by the Internal Revenue Service (IRS) against a person’s or business’s property due to unpaid tax debt. It essentially protects the government’s interest in the debtor’s assets by notifying creditors that the IRS has a legal right to the property in question.
Before an IRS property lien is filed, a few conditions must first be met.
This is typically the way things work with most IRS property lien filings:
Step 1: Tax Debt Arises
There is no IRS property lien without an existing tax debt. This debt arises when you owe taxes and fail to pay them by the due date.
Once the IRS determines you owe a back tax balance, they will send you a physical letter known as a Notice and Demand for Payment or CP14. Below is a sample CP14 letter.
If payment is not made, things will progress to step 2.
Step 2: Lien Is Placed
With the sending of the Notice of Federal Tax Lien letter, the IRS makes it clear that the lien is now active. Typically, the lien is public record, applies to all property, and even applies to property you might acquire during the time when the lien is active.
An IRS tax lien also has legal priority over most other creditors if/when property is sold or refinanced.
Step 3: Lien Release or Levy Action
Once the tax debt is paid, the lien is released. Until this happens, however, the lien remains in place and cannot be removed or modified by any other party but the IRS.
If the original tax debt is not resolved and enough time goes by, the IRS may opt to enforce a levy, which is seizure of your property.
What You Can Do to Stop an IRS Property Lien
Let’s now move into the action you can take to stop an IRS tax lien from being filed against your property.
These are the options available to you if you are facing the prospect of an IRS property lien.
| IMPORTANT: Choosing the best option for you can be a complicated decision. Thankfully, you don’t have to make this decision alone.
The tax resolution experts at Traxion Tax are here to help you navigate this journey with expert advice at every turn. To schedule your free consultation, call us now at (303) 376-9797. |
Option #1: Pay the Debt ASAP
This may seem obvious, but paying the debt is the fastest and surest way of having the property lien lifted.
Option #2: Set up a Payment Plan
Also known as an Installment Agreement, a payment plan allows you to pay down your tax debt over time.
It may also be possible to enter into a Streamlined Installment Agreement, which may benefit you but also has some conditions that must be met.
Option #3: Request a Withdrawal
If your lien was placed in error or if the lien is preventing you from actually paying your tax debt, it may be possible to have it withdrawn.
Option #4: Submit an Offer in Compromise (OIC)
If you can prove financial hardship, you may be able to settle your tax debt for a lower amount than what the IRS says you owe. This requires documentation, however, and there are no guarantees your offer will be accepted.
Option #5: Apply for Discharge of Property
If you need to sell an asset to pay your tax debt, you may apply to have the lien lifted from that asset. However, the lien will remain on all other assets unless you apply to have them discharged as well.
Option #6: Contest or Appeal the Lien
All liens can be appealed within 30 days of notification of their placement. This is done by requesting a Collections Due Process (CDP) hearing.
It is very rare that liens are released upon contest or appeal unless there is overwhelming evidence and documentation in support of the release.
Where to Go from Here
It’s one thing to know what your options are when faced with an IRS property lien, but it’s another thing entirely to choose the best option and then to proceed with communicating with the IRS properly.
At Traxion Tax, we know how to deal with the IRS in a way that optimizes your chances of a favorable outcome. That may mean a lien discharge, an accepted Offer in Compromise, or even a complete lien reversal in some cases.
To get the facts about your case and to know more specifically where you stand with the IRS, contact our team at (303) 376-9797.