The government can place a lien on your property if you don't pay your tax bill; this means they can take it from you and sell it for the money owed on your taxes. This applies to both local, state and federal tax agencies. The amount of time it takes for the lien to take effect and the associated penalties depend on the extent of your tax debt and individual circumstances. Likewise, settlement procedures vary from state to state, but there are some common approaches to settling both state and federal tax liens.
Contact the person or department listed on the notification. Your state's Department of Revenue or the Tax Collector will notify you by mail if you are in jeopardy of having a lien placed against your assets. The IRS will issue a Notice of Federal Tax Lien. The amount of time you have to respond varies by state; however, the IRS provides 10 days to respond to the initial tax bill. They are also obligated to notify you within seven days of filing a lien against your property.
Request to pay in installments. Estimate how much you will be able to pay per month to settle your tax bill. Outline your request and the length of time it will take to pay off the tax bill in a letter. In most states, such as California, you can do this online; however, if your tax bill is more than $10,000, you will want to request the help of a tax attorney. Contact the local bar association for references.
Request a settlement. If you believe there are errors in the tax bill amount, or if you can prove that the amount is impossible to pay off, the county, state or IRS may offer you the ability to reduce the amount of your tax bill. The IRS refers to this as an Offer in Compromise (OIC). Call (800) 829-1040 or visit a local IRS office for assistance. Call the name or department on the tax bill to request a meeting if the lien is from the county or state.
Find someone to purchase your tax lien certificate. If the lien is against your home, contact the local Tax Collector's Office and ask about the tax certificate program. Ask them what you can do to make your house more attractive for investors looking to invest in a tax lien home. You will have to pay interest to the person who agrees to buy your certificate as they will be giving you a loan for the amount of your tax bill. This will provide you with additional time to pay off the tax bill; however, if you default on a payment to the investor, you could lose your home.
Tips & Warnings
- If you believe the amount is in error, be sure to request a lien release be sent to the county, city or state it was filed in. Also be sure to have the state notify the three major credit bureaus about the error.
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