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    How a Federal Tax Lien affects you.

    October 6, 2013 | Tax Liens

    How a Federal Tax Lien affects you

    A federal tax lien may be a serious consequence resulting from a failure to pay taxes. If a taxpayer fails to pay overdue taxes within ten days of receiving notice from the IRS of the unpaid taxes due, a tax lien can result. The lien is placed on all of the taxpayer’s property including both their real estate and personal property. The lien attaches to both tangible property (e.g., a house or a car) and intangible property (e.g., stocks and bonds). This lien is a public document normally filed in the county you reside that provides notice to others that the IRS has a legal right to your property.

    The easiest way to remove the federal tax lien is by paying the taxes due. Once the taxes have been paid, the IRS will release the lien within 30 days after payment. It is likely, however, that if you did not pay your taxes on time, you are unable to pay the taxes owed in full and will therefore incur a tax lien. The IRS cannot force you to sell your property by filing a federal tax lien, but they can if they take the next step and levy the asset that was has a lien upon it. However, should you sell the property subject to such a lien, the IRS will receive the proceeds of such sale, up to the amount of tax debt owed, before you receive any of the proceeds from the sale. If the tax debt is not satisfied by one sale, the federal tax lien will remain in force until the tax debt is satisfied. The lien also includes interest that accrues on unpaid taxes and penalties assessed up to the date of filing. Therefore, the federal tax lien amount may not be the amount owed since extra charges could have accrued. This interest accrues from the date the payment is due until the date the payment is satisfied. As a result, it is in your best interest to pay the taxes due as soon as possible to avoid excessive interest and penalties.

    In order to avoid a IRS lien, you should regularly file and pay your taxes. It is also important not to ignore any notices that you receive from the IRS. Failure to pay your taxes and ignoring notices from the IRS may ultimately result in a tax lien, which will haunt your credit score. The IRS does not report a federal tax lien directly to the credit bureaus. However, as a public record such agencies have access to this information. Credit bureaus frequently review such public records and that’s how the lien becomes included on your credit report. A federal tax lien will negatively impact your credit score, which as a result may make it more difficult for you to obtain credit. Once a tax lien is satisfied, it will remain on your credit report for up to seven years. An unpaid tax lien will remain on your credit report indefinitely. As a NY tax attorney we are here to help you with your tax problem.

    By: Timothy S. Hart

    Attorney Timothy Hart

    Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]