A federal tax lien is essentially an IRS (Internal Revenue Service) claim against your assets if you fail to pay your income taxes. If you don’t pay your required taxes, the IRS have all the right to recover your debt by claiming your assets such as any real estate you own, your car, wages, bank account, and other applicable assets.
How Do I Respond to the IRS?
Once the IRS sent you a “Notice of Intent to Levy,” you must respond to them within 30 days and your response must include the following:
- The entire incident history
- Your entire tax payment history
- Why you didn’t comply with the tax code
- Your particular reason for not paying off your taxes
- Any proof, including documentation and witnesses that will prove your stated circumstances
McCullough & Sparks and other experts say that it is important to note that while the IRS places tax liens on debtors, it is not the only organization or agency that can file tax liens for delinquent debtors. County and state tax collection bodies could likewise place tax liens like the IRS. In addition, while the exact procedures differ from one state to another, you must respond to local and state agencies as you would respond to the IRS.
What Will Happen to You?
Tax liens can cripple you for up to 10 or more years according to the statute of limitations. As a result, you’ll have problems — if you can at all — making big purchases like cars, property, and even household items like appliances or furniture. Your case with the IRs will likewise show up in your credit report. If you don’t do anything to fix your problem with the IRS, they will seize your assets.
You should know that if you can catch a lien prior to it becoming official, you could avoid the stress and negative impact — and maybe qualify for abatement of your penalty, which can lower your total owed amount by 24% to 50%. Tax issues contain a host of complex legal issues, so if you were facing a tax lien, it would be in your best interest to get help from an asset protection lawyer to ensure that your rights will be upheld.