Resolving a tax lien is a daunting and laborious task if you choose to do it alone. As a business owner, we know your time is valuable. Boxelder Consulting can file the CDP paperwork for you and will negotiate directly with the IRS on your behalf - in the meantime, you can keep focusing on the livelihood of your business and family.
UNDERSTANDING A TAX LIEN
A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets.
The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property. For more information, refer to Publication 594, The IRS Collection Process (PDF).
Resolving a tax lien is a daunting and laborious task if you choose to do it alone. As a business owner, we know your time is valuable. Boxelder Consulting can file the CDP paperwork for you and will negotiate directly with the IRS on your behalf – in the meantime, you can keep focusing on the livelihood of your business and family.
How to Remove a Tax Lien
Tax Liens affect your credit and reputation; removal of these liens in a timely fashion will provide an immediate and tangible benefit to your business including lower interest rates and a higher credit rating. If you know where to start, there are several ways to remove a tax lien – keep reading to learn about your lien removal options.
Appealing the Lien
The IRS will remove a Notice of Federal Tax Lien only if you can prove that it was done in error. In order to appeal a federal tax lien, you’ll need to meet at least one of the following conditions to prove the IRS was in the wrong:
You’ll see an option to request a Collection Due Process (CDP) hearing with the Office of Appeals on the Notice of Federal Tax Lien sent by the IRS. The request for an appeal must be made by the date indicated on the notice, which is usually 30 days after the lien file date.
A lien withdrawal is a possible option for taxpayers who meet one of the following criterion: (1) the lien is completely paid off (2) the lien was filed falsely, or (3) you’ve qualified for the Fresh Start Initiative with a liability lower than $25,000. If you fall into one of these three categories, you’ll want to take proactive steps upon receiving the lien notice in the mail and file Form 12277, Application for the Withdrawal of Filed Form 668. Once this request is filed, and if the information provided is accurate, the agency will withdraw the intended lien before it is actually placed on your account.
A lien release is similar to a withdrawal, however, a tax lien release is issued when a taxpayer repays the full obligation after the lien has already been placed on his or her account. This typically occurs when the taxpayer has not responded to the original Notice of Federal Tax Lien and the IRS is forced to proceed by attaching a lien to one’s property and assets. Once your debt has been paid in full, or you’ve arranged a streamlined installment agreement, the IRS is obligated to release the lien after 30 days. Unlike a lien withdrawal, a release will remain on your credit report for up to ten years after the debt has been paid.
How to Remove a Lien from Your Credit Report
After you’ve had the tax lien removed, either through withdrawal or release, you’ll want to take the initiative to contact the three credit agencies to make sure your credit report is updated accordingly. Tax liens can tarnish your credit history for years to come, which can ultimately affect whether or not you receive loans, mortgages, and other life necessities. Follow these simple steps to remove a lien from your credit report:
- Get a copy of your credit report once you’ve received a Notification of Withdrawal or Release from the IRS. This way you’ll be able to identify the status of lien – oftentimes, the bureaus will automatically update the lien on your report. However, there are many cases where the IRS has failed to report changes on your account.
- If the IRS did not automatically update the status of your lien, you’ll want to contact each agency to dispute the lien.
- The credit bureaus will then contact your local courthouse to confirm that your dispute is valid. After they have established that your information is accurate, the credit bureaus will send you notification for your records.
- Most credit bureaus will request some sort of verification that proves your lien was released. Once you provide them with the proper documentation, they should be able to update the status of your lien accordingly.
Lien vs. Levy
A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt. A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize and sell any type of real or personal property that you own or have an interest in.
How a Lien Affects You
- Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
- Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
- Business — The lien attaches to all business property and to 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.