What is a tax lien?
A Federal Tax lien is notice to the world that you owe the IRS money. The liens are published in town/city land records or in the country courthouse, depending on where you live.
But why did the IRS didn't tell me there was a tax lien?
They actually did; or attempted to. The IRS will mail a Notice of Intent to Levy, A Form CP504. This letter looks like any other letter the IRS sends and comes regular mail or certified mail. Maybe you didn't open the letter understand it, or you never were around to sign for it, or the IRS sent it to the wrong address. After that 30 days expires, the IRS will be able to file a tax lien against you at will.
Note: In rare exceptions, the IRS is allowed to file what is known as a jeopardy tax lien — these normal channels do not apply and the IRS is allowed to file a lien immediately,
How the does IRS file a tax lien?
The IRS will simultaneously mail the lien to your town/city land records or courthouse and then also send you a copy in the mail certified to you. For many people, and in most cases, the tax lien is filed before most people find out about it.
The damage a tax lien does.
Tax liens are picked up by all three credit reporting agencies. It is our experience that your credit score will drop by around 100 points. Tax liens will encumber a property — but only if you have an equity interest in it (ex.: say your spouse owns a the house you live in, and your spouse does not have a tax problem. The lien will be addressed to you at your home, but it will not affect your spouse's title to the property).
The Hope: Withdrawals are Golden and are Very Possible
There is a way to minimize, if not eliminate, the impact of a Notice of Federal Tax Lien on your credit report.
A Release of Federal Tax Lien does nothing to remedy the damage done to your credit report by the filing of the Notice of the Lien, because the Notice (and the Release) remain on your credit report for a minimum of seven years.In order to eliminate the negative impact the Lien has on the your credit rating, one must obtain a Withdrawal of Federal Tax Lien. Unbeknown to many, including most tax practitioners, a Withdrawal effectively erases the Notice of Federal Tax Lien from the taxpayer’s credit report, making it appear as if the Lien were never there.
Practically speaking, and what many tax attorneys don't know is that any taxpayer may ask the IRS to withdraw a Notice of Federal Tax Lien, even if the Lien was previously released. As recently pointed out by National Tax Payer Advocate Nina Olsen, the IRS' previous claims that a Released Lien could not be withdrawn are unsupported by the law.
Conclusion
It is essential that taxpayers do not take the filing of a Federal Tax lien laying down and fight it. The cost of allowing a lien to remain can be paralyzing. And the golden lien withdrawal solution is, while not guaranteed, is nonetheless, available. If you'd like assistance understanding what the best move in your case is, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.
