IRS tax liens can be broken down into two categories:
(1) unfiled liens and (2) filed liens.
Unfiled IRS Tax Liens
Unfiled IRS liens are also known as secret liens or general tax liens. They are authorized under 26 U.S.C. section 6321. They’re secret because they arise automatically once you owe money to the IRS, receive a request for payment, and don’t pay the tax. No one except the IRS and the taxpayer knows about the secret liens, so they do not impact credit scores. Under 26 U.S.C. section 6322, the lien lasts as long as the tax remains unpaid or the statute of limitations on collections expires.
IRS Filed Liens
When most people discuss IRS liens, they’re talking about IRS filed liens. IRS filed liens are usually filed in the county where you reside, with the Secretary of State, or both. Filed liens are notice to all parties and impact the priority of the IRS.
IRS liens negatively affect credit scores. All the major credit reporting agencies learn of the lien. Banks may also reduce your lines of credit after a tax lien is filed. And after an IRS tax lien is filed, it’s difficult to refinance or even obtain a new credit card.
Filed liens last as long as the statute of limitations on collections: 10 years from the date the tax is assessed. There are things that can extend the statute of limitations even longer, such as if you attempt an offer in compromise. And at the end of the 10 years, the IRS can sue you in district court to bring the liability to judgment. At that point, your state’s statute of limitations on judgments would take over. Generally, this means the statute of limitations gets extended an additional 10 years.
What’s the IRS Lien On? Not Just Your Home.
Many people mistakenly believe IRS tax liens only apply to the real property they own. In reality, the tax lien applies to almost all of the taxpayer’s property. It even applies to property you do not currently own but acquire in the future. This includes real property, vehicles, retirement accounts, and most everything else you can think of.
IRS Tax Lien FAQs
When Can the IRS File a Lien?
If you owe money to the IRS, they will send a notice and demand for payment. If you don’t pay or respond within 10 days, the IRS can file a lien at any time. Generally, liens are only filed if you owe $10,000 or more to the IRS. If the IRS is threatening to file a tax lien, you can sometimes negotiate an extension of time. For instance, if you are trying to liquidate assets to fully pay the IRS, you can generally obtain a 90-day full-pay hold and prevent the lien from being filed.
How Can I Get a Lien Released?
There are a few ways to get a tax lien released:
- Pay the balance due in full.
- Complete an offer in compromise.
- Pay the assessed balance down to $25,000 and sign a streamlined installment agreement where the monthly payment is automatically deducted from your bank account every month. You’ll need to wait three months before the lien can be released.
Will the IRS Tax Lien Go Away if I File Bankruptcy?
No. Tax liens survive bankruptcy. Even if you discharge the underlying debt, the lien stays in place. This means if you sell a property subject to the lien, proceeds will pay off the lien.
What’s the Difference Between a Lien and a Levy?
An IRS lien is not a levy. A levy is a seizure of assets whereas a lien is a security in assets. Just because the IRS files a lien, it doesn’t mean the IRS will foreclose on your home or seize money in your bank account. If you go to sell a home subject to an IRS lien, however, the IRS will receive any equity in the property (allowing for priority lien holders).
Need Tax Lien Help? Contact Paladini Law.
If the IRS has filed or is threatening to file a tax lien, you should probably hire a professional to help. Paladini Law has experience preventing tax liens and negotiating their release once filed. Call us at 201-381-4472 or contact us here.