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- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Tax Lien
As an individual or a business owner, you must pay your taxes on time. There are different types of liens that could be placed on your assets if an individual is unable to pay for the commitments.
One of the most common liens is tax liens. In this post, we will understand what is a tax lien in detail.
What Is A Tax Lien?
A tax lien is a legal claim on the property of an individual or entity that is unable to pay taxes owed to the federal government.
Typically, this type of lien serves as security for the payment of federal taxes. If the obligation is not met, the government can proceed to seize the property.
As we all are aware that all working individuals and entities must file tax returns and pay their tax liabilities every year, and if not paid, you could have a tax lien on your property and/or assets.
The government tax authorities will use this lien to seize your assets, including financial accounts and personal and commercial properties.
All the tax liens are available as public records. These types of liens may impact your credit and lower your chances of getting any credit in the future.
Once this lien is updated on your credit report it shows in your report for up to 7 years even if you pay the lien in full. If unpaid, it will show up on your credit history for up to 10 years from the date it was reported.
If the individual or the entity is facing financial challenges, as long as they making efforts to repay, the Internal Revenue System (IRS) will provide a variety of payment options to avoid a lien on your property.
If there is a lien on your property, if you pay the taxes in full within a specific time frame, the IRS will cancel the lien within 30 days from the date you made the payment.
The IRS can make a so-called compromise offer to taxpayers if they can’t agree on a payment plan, meaning it doesn’t expect to receive the full amount owed within a reasonable time and hope to get back what is possible.
How Does A Tax Lien Affect You?
Your credit rating may drop: This type of lien may no longer appear on your credit report, but the IRS can still send a public withholding notice informing creditors that the government has a right to your property. This can jeopardize your ability to get a loan,
Unable to Refinance Or Sell Property: These types of liens mostly would come to notice during the property title search if you are selling or refinancing your property.
If you have enough equity in your home, you can take cash out to pay off this lien.
Time Consuming Process: The IRS directs many late taxpayers to their automated collection system, ACS, which can mean hours of waiting in a call center.
Several taxpayers may be assigned to a tax officer, and the defaulter may have to pay multiple personal visits.
Tax Levy: If you fail to pay your unpaid tax after the IRS has filed your lien, the IRS may issue a Notice of Intent to Collect.
Conclusion
The best way to avoid tax lien is to make sure you file your taxes and pay the dues on time.
In case of any financial challenges, you can always request IRS for payment options to help you pay the lien.
You can also request to settle your owed taxes to IRS for less than what you owe, however, the chances of your offer getting accepted by the IRS is too low.
Keep in mind that once the tax lien is filed on your report, it would take years before it could be cleared from your credit history.
