If you receive a tax lien against your property you could be very reasonably concerned and worried. This article will give you more information on what to do if you get a tax lien imposed against your home.
What is a tax lien? A tax lien is a document filed with the county government alerting the public that you have unpaid debt. If your property is sold, the government debt owed is deducted and you will receive the rest of the amount. There are different types of tax liens, it could be a Federal Tax Lien, a State Tax Lien or a Super Lien which is when you are behind on homeowner’s association fees.
You could also be asking yourself how serious a Federal Tax Lien can be, well the IRS, for all the fear it instills in taxpayers, is well known for working with those who owe a lot of back taxes. If you also owe taxes to a smaller government entity, such as your state or municipality, it can be an even bigger problem. In some states, as crazy as it sounds, people have lost homes for owing just a few hundred dollars in back county and city taxes. As a general rule, you should worry about paying back the smaller government debts first. However it is also very serious. If the debt is not paid it could result in you losing your home.
A Tax Lien however could be worked out until you pay off the debt but a tax levy is something different entirely and is much worse. A lien is simply a legal claim against the property. A levy is a legal seizure that actually takes the property to satisfy the tax debt, A lien on what you have is bad enough, but receiving later in the process a Notice of Intent to Levy and Notice of Your Right to a Hearing means you are now in deep trouble. Even if your house isn’t taken, other assets could be, according to Lassar. “If a taxpayer refuses to pay an amount owed, her wages, bank account, other federal payments, house, car or other property may be levied.
However if you are proactive you can avoid a tax lien. Contact the number on the paperwork you receive informing you that you owe money to the government. You may be able to work out something better than you expect. For instance, sometimes the IRS will allow subordination, which lets other creditors like financial lenders take their debts before the IRS. This can make it easier to get a loan or mortgage. Sometimes the IRS will also allow an Offer in Compromise, which allows the taxpayer to satisfy the debt with a smaller amount.