Understanding a Federal Tax Lien

Taxes put stress on everyone, whether it be filing taxes or paying them, the whole process can be stressful for many people. In some cases individuals are unable to pay their taxes, whether it be entirely or in part. In these cases the government can put a lien on your assets, as collateral against the money owed to them. Let’s look at what exactly a lien is, how it works, and how to avoid, or remove it.

What is a Lien?

A federal tax lien is the government’s response to unpaid taxes. When the government issues a lien for your property, it means that they have laid claim to your property and assets, and have notified any impacted creditors of it. This notice can greatly impact your ability to get credit, and will remain with you until the owed taxes are paid.

How do I Avoid a Lien?

To avoid a tax lien, the easiest thing to do is to pay your taxes in full. If you are unable to, however, it is important to work with a financial advisor to develop a repayment plan with the IRS. There are a few options for negotiating your owed taxes, such as a payment plan, and a offer in compromise. A payment plan, though not ideal, is a much better option than a lien. Working closely with a CPA can help you in the scenario that you are unable to pay your taxes in full.

What if I already Have a Lien?

If you already have been issued a Lien, the best way to have it removed is to pay your unpaid taxes, and quickly. Once it is paid there will be some paperwork that has to be filed to appeal the lien. If you’ve received a notice of a lien it is important to work with a financial advisor who specializes in taxes so that further damage isn’t done to your credit. Dealing with the lien quickly and ensuring the proper paperwork is filed can help you get your credit back on track faster.

If you are facing uncertainty with your taxes, call us at CFO Source today to discuss your situation. Our team can help you determine your best course of action proactively, or help you move forward in the case a lien is already in place. Give us a call today to discuss your situation!