When you owe back taxes to the government, the Internal Revenue Service may place what is known as a “tax lien” on your property. A tax lien is a little different from a tax levy while both are ways the IRS uses to collect what is owed from you. A tax lien is a document that is filed with your county government letting the general public know that you owe unpaid taxes to the federal government.
The lien essentially protects the government’s ability to collect that money that it is owed. An IRS levy on the other hand is the action of collecting taxes owed by seizing a bank account or garnishing wages.
A tax lien, when it becomes part of public record, can have a severe impact on your financial health. Once the lien is recorded with your local county government, your credit history will get affected, which can have an impact on your ability to buy property, get a credit card, rent a home or find employment.
Dealing with a tax lien or even facing the prospect of one can be stressful and intimidating. The Arizona tax attorneys at the Pew Law Center PLLC can assist you through these challenges and help you protect your financial future. Call us at (480) 745-1770 to find out how we can help you.
Why Are Tax Liens Filed in Arizona?
An IRS tax lien is a type of security interest granted over an item of property to secure the payment of tax debt. One of the reasons a tax lien is imposed on property is if you fail to pay property taxes. This type of IRS tax lien attaches itself to your property requiring you to take action. A tax lien can also be filed if you fail to pay income taxes.
This type of tax lien attaches to your money, your credit and public records. Like property tax liens, these types of tax liens can also be attached to specific pieces of property such as your home or vehicle. IRS tax liens issued for tax debts can be avoided if the proper action is taken at the right time. Otherwise, a tax lien will remain until your fully pay your back taxes.
How Does a Tax Lien Affect You?
A tax lien can affect different aspects of your life such as your:
Assets: An IRS tax lien can attach itself to all of your assets such as property, securities, vehicles and future assets that are acquired in the duration of the lien.
Credit: Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit, which is needed to buy property, vehicles, or even to rent a house.
Business: A tax lien also attaches to all business property and all rights to business property including accounts receivable.
Bankruptcy: If you file for bankruptcy, your tax debt, lien and Notice of Federal Tax Lien may continue after the bankruptcy.
Can an Arizona Tax Lien Be Removed?
For tax liens to be removed, you need to address the problem that created it in the first place – your tax debt. However, there are a few circumstances where you can get a tax lien removed without paying off your tax debt first. If the IRS placed a lien on the house, it will usually not be removed unless you are selling the house and they get paid from the proceeds of the sale.
If you want to refinance your house, you can apply to have the lien subordinated. This means that the IRS agrees that the new mortgage company will get paid first if you choose to sell your home in the future.
Another option is what is known as an Offer in Compromise. An experienced Arizona tax attorney can help you go through process, where you may be able to settle with the IRS for pennies on the dollar. You may be able to pay a reduced amount as a way to settle your debt with the IRS. Once you pay this offer amount, your past due taxes will be reduced to zero and the lien will be withdrawn.
In order to qualify for an Offer in Compromise, you must show the IRS that it is doubtful the IRS can collect the debt from you now or in the foreseeable future. You may also have show that payment of the full tax bill will cause you undue economic hardship.
Removing Tax Liens from Your Credit Report
There are some helpful laws that can help you get tax liens off your credit report. You could use the “Fresh Start Program,” which the IRS created in 2011. It allows individuals to get tax liens removed from their credit report under certain circumstances even if the debt has not been paid in full. To do this, you’ll need to file an Application for Withdrawal of Filed Form 668 (Y), Notice of Federal Tax Lien.
The next step is to file Form 122277 with the IRS. You should get a response within 30-45 days telling you if you’ve been approved for the Fresh Start Program. If you have been approved, you will need to dispute the tax lien with the three major credit bureaus. The credit bureaus will contact the court that issued the lien to verify that the IRS has withdrawn the lien.
That should have already happened if you got approved for the program. The credit bureaus will then remove the tax lien from your credit report.
How Our Experienced Lawyers Can Help
The important step to take if you are facing a tax lien or the prospect of a tax lien is to seek the counsel of an experienced Arizona tax attorney who can help you reach an Offer in Compromise or enter into an IRS repayment program. This will lead to your lien being paid in full after which you can petition the IRS to withdraw your lien.
This is a complicated process that requires meticulously filling forms and submitting relevant paperwork. Your tax attorney can help you navigate this tricky process and help ensure that an IRS tax lien doesn’t affect your long-term financial well-being.
If you are facing an IRS tax lien, call the skilled IRS lawyers at the Pew Law Center PLLC to find out how we can help you overcome this challenge and get that fresh start.