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WHAT IS A TAX LIEN?

Lien on me?

Tax liens are a powerful weapon in the arsenal of the IRS and other tax agencies, including the Franchise Tax Board (FTB), California Department of Tax and Fee Administration (CDTFA), and the Employment Development Department (EDD). A federal tax lien notice (or a state tax lien notice) can cause a great deal of trouble and difficulty for many individuals and businesses. What are tax liens and how can a taxpayer eliminate them or reduce their impact?

There are two types of tax guarantees, the “invisible” guarantee and the federal tax guarantee notice (or the state tax guarantee notice). An invisible guarantee arises when the IRS sends a notice requiring payment of taxes and the taxpayer fails to pay taxes. This invisible collateral is not a matter of state registration (so it is an invisible collateral) and has minimal impact on most taxpayers.

The lien that keeps many people up at night is the Notice of Federal Tax Lien (or Notice of State Tax Lien). This lien is a public record that the IRS (or state taxing authority) files with the County Recorder, Secretary of State, and other offices where liens and mortgages are recorded. A federal tax lien notice can make it difficult for a person to sell property or obtain loans. 

A notice of federal tax lien is like a second mortgage or registered judgment. It is an obligation that is attached to a taxpayer’s property and is often not released until the taxpayer pays the tax in full. If a taxpayer attempts to sell a property, the lien generally must be paid in order to get the property out of escrow. Unlike a second mortgage, which typically attaches to a single property, a federal tax lien attaches to all of a taxpayer’s property. The lien does not only apply to real estate, but also applies to any type of asset, including equipment and intellectual property. The IRS can foreclose on a lien subject property, but this is relatively rare. 

A tax lien must be distinguished from a lien. A lien involves the IRS simply asserting a property claim, while a lien involves the IRS actively seizing money and other property. A lien usually involves the IRS taking money from people’s bank accounts or paychecks. 

Once the IRS (or other taxing authority) files a tax lien notice, it is quite difficult to remove the lien without paying the tax in full. However, there are several ways to avoid or mitigate the damage caused by liens. 

Avoiding the lien

The best way to avoid all of the negative repercussions of a tax lien is to avoid the lien altogether. Timely compliance with all tax obligations is, of course, the best way to avoid a tax lien. However, if you fall behind on your taxes, all hope is not lost. Involving the IRS (or other tax authorities like the Franchise Tax Board) can be an effective way to avoid a tax lien notice. It is often possible to negotiate payment plans with the IRS (and other agencies) that avoid a federal tax lien notice (or a state tax lien notice). However, you must be prepared to open your wallet and make payments.

Withdrawal of tax lien

In some circumstances, the IRS will remove a lien when doing so will promote the collection of a tax. For example, if a defense contractor’s security clearance can be revoked due to a lien, the IRS can withdraw the lien since the IRS cannot collect the tax if the defense contractor loses his business or job. Therefore, withdrawing the lien promotes the collection of taxes from the IRS. Professionals such as securities brokers whose FINRA licenses may be compromised by liens can also have their liens withdrawn by the IRS for similar reasons. 

lien subordination

Obedience to bail does not remove bail, but it can be a good way for many taxpayers who want to rent a home or take out a home loan. In support of the bail, the Tax Shelter and Customs Board agrees to be regulated (or to reduce your priorities to second or third place). The IRS does not act in the best interests of the individual and only acts in the interests of the IRS. A good example of collateral is when a taxpayer arranges their home to pay off a monthly loan. The IRS will regulate their collateral so that the taxpayer can be processed, but the IRS expects the taxpayer to pay at least a portion of the loan savings on a monthly basis to the IRS.

Download tax lien

Release of collateral includes the Revenue and Customs Office releasing certain assets from the lien. The collateral continues to apply to the remaining assets held by the taxpayer. There are three main reasons of Tax Office offers issuance of tax. The first reason is that the IRS’s interests in property are zero. This can happen when a loan or a loan takes more time than taxes on assets.

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