Overview of an IRS Tax Lien on a Property
Taxes can be a heavy burden, especially on individuals who have had a medical problem, have become unemployed or are self-employed and just couldn't keep up with the extra taxes that come from owning their own business. One nightmare is to end up with a notice of a federal tax lien on your home, business or both. While it can be an emotionally hard situation, knowledge is still your best tool in coping with the situation.
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Notice of Federal Tax Lien
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A tax lien starts with a "Notice of Federal Tax Lein." This is when the IRS decides to seize legal possession of a person's property until the owed back taxes are completely paid off or another deal is cut. The legal claim means that while you're still responsible for paying the mortgage and other bills, the IRS has legal rights over the property to use it as collateral against the owed debt.
Necessary Assessments
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There are three steps that must legally be taken before the IRS can file a tax lien on any property you own. First, it must officially assess the liability. Second, it must send a notice and demand of payment, which specifically states the exact amount owed in taxes. Finally, 10 days must pass from the time of notification with no contact or attempt to pay the amount owed. After all this, then the IRS can file a tax lien.
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Releasing a Lien
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You can apply for a release of a lien, and it may be granted under two conditions, according to the IRS. You can pay off the full amount owed or present a bond that promises full payment, which the IRS accepts. Either one of these can result in the release of a lien; however, it can take up to 30 days for the full release to process.
Discharging a Lien
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Discharging a lien is when the person who owes the taxes gives up possession of the property. Special permission is needed for this, and the IRS is still going to get its cut. A classic example is selling a house that is under a lien. The IRS can give permission for the sale to take place, but it's going to get its share of the sale to pay off what's owed.
Subordination
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Subordination is a rare situation in which someone applies to have the IRS's lean put behind another lien that prefers to have first claim. Subordination is most often an action taken by a group, like a bank, that might already have a lien on the property, and this other group feels that it has a good case not to be pushed aside by the IRS.
Appeal Options
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If you have a tax lien put on your property by the IRS and you feel it's a mistake, there are appeal options. You must request a review with an IRS manager by the date that's printed on the notice. A ruling is made, and, if you disagree with the decision, then you have 30 days to ask for a court review.
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References
- Photo Credit Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
