What is a tax lien? When a tax debt is owed to the Franchise Tax Board of California or IRS, the agencies may file a tax lien to protect their interests in your income and assets. Proper filing of the lien permits the taxing authority to take enforcement actions, such as seizing your property or issuing a wage levy, to collect the balance due.
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, a record of the lien usually remains on a credit report for approximately seven (7) years. Taxpayers are encouraged to request a free credit report at least once a year from one of the three major credit reporting agencies to determine if a tax lien is affecting their credit score.
Tax liens are typically filed in the county where the taxpayer resides. In the case of a business tax liability, a lien is filed with the Secretary of State within the state the business operates. IRS tax liens are very powerful collection tools that attach not only to your current assets, but also to any personal or real property you acquire after the lien is filed. Taxpayers that disagree with a tax lien that was filed by the state or IRS, can submit an appeal and request that the lien be ‘withdrawn’.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. Taxpayers can utilize the IRS Fresh Start program to remove a lien that has already been filed or prevent a lien filing by making arrangements to settle their tax debt.
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