Failing to comply with tax laws, like filing your return on time or paying what you owe, could eventually lead to serious IRS enforcement actions, like liens, levies, and criminal charges. If you’ve already received a few notices about an outstanding tax balance, you may be facing a federal tax lien.
The IRS may issue a tax lien when you owe taxes and haven’t responded to notices. A tax lien is a legal claim the IRS makes against your assets and alerts other creditors that they have a right to seize your property.
If you’re dealing with a tax lien, should you hire a tax attorney? This guide walks through when to work with an experienced law firm like Damiens Law.
Key takeaways:
- A federal tax lien is the IRS’s claim on your assets due to your outstanding tax debt.
- A lien is a public record, visible to other creditors, so it can impact your ability to get credit or refinance your home.
- It’s a must to work with a tax professional when you have a really high balance that you can’t get on top of, you’re facing tax levies, or you don’t agree with the lien filing.
- A tax attorney can help you understand your resolution options, negotiate with the IRS on your behalf, or help you through the appeals process.
- Weigh the complexity and severity of your situation against the cost of hiring a tax attorney. Often, working with an expert will save you time and money in the long run.
What Is an IRS Tax Lien?
A tax lien is a legal claim the IRS makes against your assets, which aims to protect the government’s interest in your property. A tax lien is a public record, so all your other creditors can see it. Potential impacts of a tax lien include:
- Your ability to get a new line of credit, such as a loan
- The process of buying or selling a property in the future
- Your business’s reputation
- The safety of your assets, including physical property and securities
The IRS can file both individual and business tax liens. But remember that a lien isn’t the actual process of the government taking your assets. It just ensures the IRS keeps its place in line to be paid out to cover your tax debt.
Lien vs. levy: what’s the difference?
When trying to understand IRS enforcement actions, you may wonder what the difference is between a tax lien and a tax levy. Both involve your assets and property being at risk because of your outstanding tax debt. But A levy is the actual seizure of your assets to cover your debt.
Typically, if the IRS has filed a business tax lien, they can only seize business assets, but in some cases, both the IRS and the state may be able to file tax liens against personal assets for business taxes. For example, if you have unpaid Tennessee sales tax, the state may be able to come after you personally for that business debt.
When You Don’t Need a Tax Attorney for a Lien
Every tax debt case is a little different. When the IRS is filing a tax lien against you, you may have a very complex case or one that can be resolved pretty quickly. In the latter situations, you may not need a tax attorney. Consider these examples:
- You have a small tax debt balance.
- You can easily pay off your debt with one payment or a payment plan.
- You’ve filed your tax returns and are otherwise in good standing, but you just need more time to pay what you owe.
- The statute of limitations has passed for collections on your tax debt, which is 10 years from the date the tax was assessed.
- You’ve paid the tax debt, and the IRS will release the lien within 30 days.
- You don’t have assets or upcoming borrowing needs.
For example, if you get a notice in the mail about the IRS’s intent to file a federal tax lien, and you can pay off the enclosed balance right away, you should just do that and likely don’t need a tax attorney. The IRS will release the lien after you make your payment.
However, if you’re not sure what to do about a tax lien, even in these situations, it’s always a good idea to contact a tax professional for help.
When a Tax Attorney Is a Must for a Tax Lien
In some situations, working with a tax attorney adds real value. Consider these tax case examples and the benefits of hiring someone:
You Have a Complex Tax Situation
If your taxes are complicated, working with a tax expert ensures you can get the tax lien dealt with, as well as other issues you may be facing. For example, maybe you have unfiled returns, owe business taxes, or are facing wage garnishment or asset seizure.
Your Tax Balance is High
When you have significant tax debt, it can feel impossible to get out of trouble with the IRS. Working with a tax attorney means you have an expert on your side who can help you understand what a tax lien means for your finances and start to deal with your large balance.
You Can’t Afford to Pay Off Your Debt
It’s common to be unable to afford your full tax balance in one payment. But if you can’t even afford a payment plan each month, it’s time to talk to an attorney about a better relief option.
You Need Tax Lien Withdrawal or Subordination
If you’re trying to pursue a transaction that involves your credit, such as getting a mortgage or refinancing your home, you may need to get the lien withdrawn. Subordination also may help, which is when your other creditors can move in front of the IRS, so it’s easier for a bank to give you a loan using your property as collateral.
You Are Facing Tax Levies
On top of a federal tax lien, you could be dealing with potential levies from the IRS, which is the seizure of your property to cover your taxes. Contact a tax professional right away if your assets are at risk.
You Don’t Agree with the Lien
The IRS doesn’t always get things right. You may not agree with the validity of the lien or the amount of your tax debt, as listed on your IRS notices. Ask a tax attorney how you can dispute the information successfully.
Ways a Tax Attorney Can Help with a Tax Lien
Navigating a tax lien from the IRS can feel stressful, especially when you don’t fully understand tax laws and your options for getting rid of the lien. No matter the complexity of your situation, you may benefit from hiring a tax attorney in these key ways:
- Setting up a payment plan: An attorney can help you request and set up an installment agreement, which allows you to pay off your debt over time. The IRS will pause its severe enforcement actions if you have a plan in place and are making your payments on time.
- Negotiating an offer in compromise (OIC): The IRS doesn’t accept the majority of OIC applications, as many taxpayers don’t qualify to settle their debt for less. A tax attorney, however, can review your situation and assess the likelihood of getting an OIC approved, helping you get out of debt faster.
- Appealing and contesting improper lien filings: If the IRS has made a mistake in filing a lien, or the balance they have for you is incorrect, an attorney can help you make things right through an appeal.
- Protecting your assets: One of the biggest risks you face when you have outstanding tax debt is losing your property or financial assets to the IRS through a levy – there are only a few assets protected from IRS seizure, while the rest are fair game. An attorney can de-escalate the situation so it doesn’t get that far.
The tax attorney at Damiens Law understands the complexity of tax law, including federal tax liens. We can help you avoid asset seizure and credit trouble while setting up a plan to get your debt paid off.
Weighing the Cost vs. Benefit of Hiring a Tax Attorney
So, should you hire a tax attorney to deal with a tax lien? One important question to ask yourself is whether the tax lien is just an inconvenience that you can reasonably deal with on your own, or if it is seriously threatening your finances and assets.
For example, if you are annoyed by the lien but can pay off your debt or set up a payment plan on your own, it may not be worth the cost to hire someone, unless, of course, you don’t understand how to take those steps on your own or just want extra guidance to ensure you’re making the right decision.
But if the tax lien means that you can’t meet your financial goals, such as refinancing your home or getting a much-needed personal loan, it’s worth it to get help from a tax attorney. Tax attorneys will help you pursue getting rid of the tax lien from your public record. They can also ensure you’re on the right path to get back in good standing with the IRS.
Don’t risk further trouble with your taxes. Get help from a tax attorney when you’re stressed about an IRS tax lien. The cost of hiring someone is more than worth it when you can’t manage your tax debt on your own.
Contact Damiens Law for Help with a Tax Lien
When the IRS files a federal tax lien against you, it’s easy to start panicking. You may not know what to do about your mounting tax debt, and you don’t want your credit or business to be damaged by the lien.
Talking to a tax attorney about your situation will not only help your situation but bring you peace of mind. Attorneys are experts in tax law and have dealt with many cases similar to yours. They’ll help you pursue tax resolution options, such as an installment agreement or OIC, and get the federal tax lien withdrawn or released so you can move forward.
Contact Damiens Law by calling (601) 873-6510, and set up your free consultation with tax attorney Joseph Damiens today.
FAQs About Dealing with Tax Liens
Should I Hire a Tax Attorney for a Tax Lien?
A federal tax lien can have a big impact on your finances and credit. A tax attorney can help you get rid of the lien while ensuring you have the right debt resolution method in place.
How Can a Tax Attorney Help with a Tax Lien?
A tax professional will review your situation, explain applicable tax laws to you, and help you apply for a payment plan, offer in compromise, or hardship status. An attorney can also help you get a lien withdrawn or released.
Will a Federal Tax Lien Impact My Credit?
A tax lien can impact your ability to get credit from a lender. For example, a bank can see the lien since it’s public record, and they may not be willing to give you a loan since the IRS has a claim on your assets. However, the lien doesn’t show up on your credit report.
Is a Tax Attorney Really Worth It?
Deciding to work with a tax attorney does mean you’ll have to pay an extra cost. However, this cost may be nothing when compared to the IRS trouble you’ll get out of and the tax debt you’ll be able to pay off or settle when working with an attorney. If your situation is simple to manage yourself, you may not need an attorney. But if you don’t understand what to do or how to get out of debt, contact a tax attorney.
Sources:
https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien
https://www.irs.gov/businesses/small-businesses-self-employed/levy
