What is a Tax Lien and How Do You Resolve It?
A tax lien is a legal claim that the government makes against a person's property to secure payment of unpaid taxes. When a person fails to pay their taxes, the government has the right to place a lien on their property, which gives them priority over other creditors in the event that the property is sold. This means that the proceeds from the sale of the property must be used to pay off the outstanding tax debt before any other debts or obligations are satisfied.
There are a few different types of tax liens that can be placed on a property. The most common type is a federal tax lien, which is placed by the Internal Revenue Service (IRS) when a person owes taxes at the federal level. State and local governments may also place liens on a property for unpaid state or local taxes.
Once a tax lien is placed on a property, it becomes a matter of public record and can have a negative impact on a person's credit score. It can also make it difficult for the property owner to sell or refinance the property.
There are several ways to remove a tax lien from a property. One option is to pay off the outstanding tax debt in full. This will release the lien and clear the property of any liens.
Another option is to enter into a payment plan with the government agency that placed the lien. This could involve paying off the debt over time, with the lien remaining in place until the debt is fully paid. Once the debt is paid, the lien will be released.
In some cases, the government agency may agree to release the lien before the debt is fully paid if the taxpayer demonstrates that they are unable to pay the debt in full. This is called "withdrawal of a Notice of Federal Tax Lien".
If a person can't resolve the lien or don't qualify for withdrawal, they can apply for "Subordination" or "Discharge" of the Lien. Subordination allows the government to move the lien to a lower priority behind other debts or liens, making it more possible for the property owner to refinance or sell the property. A discharge of a tax lien means that the lien is removed from specific property or assets.
It is important to keep in mind that a tax lien can have serious consequences and it is best to take action as soon as possible to resolve the issue. If you are facing a tax lien, it is a good idea to speak with a tax professional or a tax attorney who can help you understand your options and guide you through the process of resolving the lien.
In summary, A tax lien is a legal claim that the government makes against a person's property to secure payment of unpaid taxes. There are several ways to remove a tax lien, including paying off the debt, entering into a payment plan, withdrawal of notice of tax lien, subordination and discharge of a lien. It's important to take action as soon as possible, and consult with a tax professional or attorney for guidance in resolving the lien.