What is a tax lien? When back taxes are owed to the IRS or Franchise Tax Board of California, the agencies may file a tax lien to protect their interests in your assets. Once the lien is properly filed, the agency has the right to take enforcement actions, such as issuing a wage levy or seizing your property, to collect the tax debt.
In addition to the prospect of a levy or asset seizure, a taxpayer’s credit score will be adversely affected by the filing of a tax lien. Taxpayers will also have difficulty obtaining new lines of credit and the chances of obtaining a loan are typically reduced. Ever after an IRS or state tax lien is released, the lien remains on a credit report for approximately seven (7) years. To determine if a lien is affecting your credit score, you can request a free credit report from one of the three major credit reporting agencies.
Tax liens are usually filed in the county where the taxpayer resides. In the case of business taxpayers, the liens are filed with the office of the Secretary of State within the state the business operates. IRS liens are very powerful collection tools that attach not only to your current assets, but also to any real or personal property you acquire after the lien is filed. If you disagree with a lien that was filed by the state or IRS, you can submit an appeal and request that the lien be withdrawn. In cases where a taxpayer is attempting to sell a piece of real property, they can request a lien discharge or a subordination of the tax lien, as appropriate. The recent IRS Fresh Start program offers taxpayers more opportunities to remove a lien that has already been filed or avoid a lien altogether by making arrangements to settle their taxes.
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