If you owe a significant amount of money in back taxes and penalties, the IRS may institute a tax lien. A tax lien is a claim on a business or an individual’s assets and is typically attached to real estate properties. This doesn’t mean the taxing authorities intend to seize your property like a tax levy. Instead, it uses the lien as collateral for the tax debt and ensures that the government has first dibs on the property rather than any creditors.
A lien can be attached to both personal and business properties. If the lien is on a business property, it can include accounts receivable and will remain in place even if you file for bankruptcy. Usually, a lien will stay active until some kind of agreement has been made to pay off the tax bill or the statute of limitations on the debt expires.
Impact of a Tax Lien
If a public Notice of Federal Tax Lien is issued on a property, it can cause serious financial problems for an individual or a business owner. Since a tax lien is public, it appears on your credit score and hinders most lenders from working with you because their risk is much greater since the IRS has first rights to your assets. This damage to your credit can prevent you from obtaining the financing to buy a car or get a mortgage, can keep you from being approved for a new credit card, or can stop you from getting a lease for a rental property.
How to Release an IRS Tax Lien
When a tax lien is released, the IRS will no longer have legal claim over your property and your credit report will be updated to reflect this change. The IRS has started offering a special program to make it easier for taxpayers to get their tax liens released and we can determine if you qualify. request a consultation online and our San Jose, CA tax professionals will find the best way to get your tax lien released.