How To Prevent Tax Liens

No one likes the word "tax" (unless of course it has the word "refund" after it). This is because we all know that if we don't pay Uncle Sam, he has the full authority to take possession of our property. This is referred to as a tax lien or levy. Of course the best way to prevent having a tax lien is to pay all your taxes on time, but some additional advice may be helpful.

Difficulty: Moderately Easy

Instructions

1. Understand what a tax lien is. This is the government's claim on your property. The federal, state and local governments can all use your property as a security on your debt. At the federal level, the IRS must notify you of your delinquency and send notice that payment is due. If you do not pay after 10 days, the IRS has the right to create a tax lien against you in the amount of the debt. State tax lien notification policies vary by state and county. Most state tax liens will provide up to two years to pay back taxes before issuing a lien.

2. If the tax lien is from the federal government, contact the IRS immediately. Request to pay off your tax debt with installment payments. Note: this will prevent the tax lien, but will not remove it once it has been filed.

3. If the tax lien was issued from a state or local tax board, contact the county recorder's office or your state's department of revenue immediately if you can't pay your state or county taxes. Ask what the procedures are for your state to pay your tax lien. If you can't pay the full amount, request an extension, offer to pay in installments, or request a settlement offer. If your tax bill is over $10,000, consider hiring a tax attorney in your state.

4. Request an offer in compromise, or OIC. This is essentially a settlement for a lower amount. The IRS/Department of Revenue/County Recorder's office will agree to this if they believe: 1) there's little chance of collecting; or 2) there are errors in the tax liability amount. An OIC is better than an installment agreement as it reduces the total amount owed and can remove a tax lien against you even if it has already been filed.

5. Act with haste. Before the IRS/state revenue department/county recorder's office can file a tax lien against you, they will mail you a notice. Procedures vary by state, but federally, the IRS has five days after the lien has been filed to send the notice. Contact the appropriate office immediately to discuss your situation and keep records of all correspondence.

References

• IRS: Topic 201 - The Collection Process

Resources

• IRS: Topic 204 - Offers In Compromise
• IRS: Payment Plans, Installment Agreements