What to do when the IRS puts a tax lien on your property

A claim by the IRS that you owe it back taxes puts more than your bank account at risk. The agency may also take your home or other property through what is known as a “tax lien.”

As readers may know, a lien is a legal claim against another party’s property. A federal tax lien creates a right by the IRS to seize your property, if necessary, to satisfy a tax bill.

The lien is created after the IRS assesses the taxpayer’s liability and sends him or her a bill, called a Notice and Demand for Payment, that informs the taxpayer how much he or she allegedly owes. If the taxpayer neglects the matter or does not pay the bill in full, the IRS may establish a lien by filing a Notice of Federal Tax Lien. This notifies the taxpayer, as well as creditors, that the agency has a legal right to the taxpayer’s property.

Naturally, learning that you might lose your property is highly distressing to most people. But a knowledgeable tax attorney can show taxpayers in this position that options still exist to remove the lien.

As the IRS puts it, one way to get rid of the tax lien is to pay what the agency says you owe. The IRS will release you from the lien within 30 days of receiving your payment.

Another option is discharge of property. A discharge removes the lien from specific pieces of property. Determining which property is eligible for discharge can be complicated, because several parts of the Internal Revenue Code is involved.

An alternative to removing the lien is to put other creditors ahead of the IRS. This may make it easier to get a loan or mortgage, which in turn can help you pull yourself out of financial difficulty.

These and other strategies during a tax collection can help protect your rights and property as much as possible.

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