A Tax Lien is the first major step the IRS takes against individuals in order to collect back taxes. A Tax Lien gives the IRS a legal claim to your property as security or payment for your tax debt. It is used in order to protect the government’s interest in your assets.
If you have unpaid back taxes and have not cooperated with the demands of the IRS to make the payments of the tax amount owed, it is likely that eventually you will receive a tax lien, which will then lead to a tax levy. Recently, the IRS will raise the debt threshold for issuing tax liens in most cases from $5,000 to $10,000 (policy change announced in 2011) largely due to the fact that tax liens can hurt taxpayers further and lessen their likelihood of getting into compliance with the IRS.
Here is how the process works. The IRS will first send you a letter with an assessment of your tax liability. This letter will typically state the amount that is unpaid as well as late payment penalty and interest. If the assessment letter is ignored, the IRS will follow up with four more letters, CP-501, CP-CP-503, CP-504, and finally LT11/L1058 in most cases. These letters will get more and more threatening as the numbers get higher. The final one of the CP letters mentions it’s intent to levy. After these letters are sent to the taxpayer and there is no response or the tax amount is not paid, the IRS determines that they are not able to collect the tax the conventional way, so the IRS will then file a Notice of Federal Tax Lien (NFTL) and potentially move forward with a levy. Once you receive this tax lien, the lien has already been attached to your property. The purpose of the tax lien is to prevent you from selling or borrowing against any of the major assets that you own. With a tax lien in place, it gives legal claim to the IRS over that piece of property that the lien was placed and removes your rights to the property. Moreover, tax liens are public records.
Before a tax lien can be filed against you, the following criteria must be met:
- The tax liability has been assessed
- A written “Notice and Demand for Tax Payment” has been sent
- You have refused or are unable to pay off your tax debt within ten days of receiving the notice
Once this criteria is met and a lien is established, it will appear on your credit report. Having record of an IRS attachment in your credit history can ruin your financial future. Your tax lien remains a public record until the amount is paid in full. This is a method used by the IRS to embarrass or intimidate you into accepting an impossible agreement. TAX RELIEF PROVIDERS will take control of your tax problems and expedite them to a fair and favorable resolution.CALL US TODAY…WE CAN HELP.
It is best to take action as soon as possible when a lien is put in place. It is not a good idea to try to wait it out until the statute of limitations expires because most likely YOU will get a levy placed on you before then and the IRS will seize your assets before the statute of limitations expires. DON’T FIGHT THIS ALONE CALL US TODAY FOR YOUR FREE CONSULTATION!
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