What Is a Tax Lien?

On: May 22, 2020

You may have heard the term “tax lien” before and wondered what it meant. If, on the other hand, you know all about tax liens—it is not, hopefully, from experience as they can be burdensome and will leave a long-term stain on your credit record.

Basically, a tax lien is a government claim against your assets. If you fail to pay your income or other taxes the government will put a “lien” on you. A tax lien is a serious step that occurs prior to an even more serious “tax levy,” which is where the government can seize your assets and garnish your wages.

The Consequences of a Tax Lien

Tax liens can occur at both state and federal levels. If you owe back taxes to the IRS and fail to take care of them in a timely fashion, the department will award you with a tax lien that will have the following consequences:

• Permanent Record: Unlike other public records, there are many instances where federal tax liens will appear on your credit report indefinitely. There are sometimes things you can do to erase them from your record; however, the best option is to avoid tax liens altogether.
• Credit: In the short term, a tax lien will have a serious negative impact on your credit score. To some, this is very significant, especially if you are going for any kind of loan as having a tax lien can hurt your chances.
• Refinancing: When people try to sell or refinance their homes, they often use a portion of their earnings to cover the taxes. If, however, they have a tax lien against them, it will appear in the title search and potentially their chances of selling or refinancing.
• Tax Levy: Although far from a “first warning,” a tax lean is particularly worrisome in that it indicates you are one step closer to getting hit with a tax levy. Tax levies can be very detrimental to your financial health as they can result in the government garnishing your wages as well as seizing your property and other assets.

Defense Against Tax Liens

If you or someone you know has been hit with a tax lien, there are a number of things they can do to protect themselves and get back in good standing with the IRS. These actions include Tax lien settlements, tax lien installment plans, payroll tax settlements, sales tax settlements, and others.

The main thing about tax liens or any kind of tax problem is that you want to try and deal with them sooner rather than later. Waiting never helps anything when dealing with the IRS. In the case of tax liens, if you wait too long and allow even more tax debts to accrue, you could end up getting hit with a tax levy where the government begins garnishing your wages. And remember, once you are faced with a wage garnishment, your employer is legally obligated to take part in your paycheck and send it straight to the IRS.

Thankfully, an effective and aggressive legal team can help you deal with your tax issues, and get your financial house back in order.

If you are having tax troubles, always make sure to call Leading Tax Group and don’t attempt to do it yourself.