Understanding the IRS Tax Lien

It’s true that you can’t go to jail simply for not paying the IRS (though, you can go to jail for lying to the IRS or trying to cheat on your taxes), but the IRS has other methods it can use to get money you owe them, and understanding them is vital.  For example, the IRS can file a tax lien against your house (or other real property), which will make it difficult for you to sell your house or refinance your mortgage. 

A lien is a document that lets creditors know that the IRS has a claim to your property.  It is different from a levy in that a lien is just a document that the IRS uses as leverage to make sure it gets late payments before the statute of limitations prevents them from doing so. It will put a dent in your credit score as well.  A levy, on the other hand, involves the actual collection of late payments directly from paychecks or bank accounts.  

Anyone who is past due on their taxes might get hit with a tax lien, but usually the IRS won’t take this action unless you owe more than $5,000.

If you are faced with a tax lien, what you should do depends on your situation:

Option A) Pay What You Owe, Immediately

Ideally, you’re in a position where you can afford to pay everything you owe right now and settle up immediately.  Just notify the IRS when you do and you will be well on your way to getting your tax lien taken care of.  If you can pay now, it will save you from having to pay compounding interest and penalties.

Option B) Set Up an Alternate Arrangement

Of course, if you owe thousands of dollars to the IRS, it may not be possible for you to pay what you owe at one time. Considering that over 60% of Americans have less than $1,000 in savings, it is actually very unlikely that you will be able to make one lump sum payment.

In that case, contact a tax attorney like Robert V. Boeshaar who can work with the IRS on your behalf to set up an alternate arrangement such as an installment agreement. The IRS is used to dealing with people who go through great lengths to avoid them, so they’re more receptive to meeting your financial needs than you might think. Being the one to initiate the conversation will earn you a lot of good will, so call as quick as you can.

If you owe more than $25,000, you may need to make one lump sum payment to get below that threshold before so you can set up a streamlined payment plan.  But again, generally the IRS will be willing to work with you as long as you make a good faith effort to work with them.

Are you facing tax issues with the IRS, including having tax liens placed on your property? Please do not hesitate to contact the law office of Robert V. Boeshaar today to discuss your options.

Latest posts by Robert V. Boeshaar (see all)