What is a Federal Tax Lien Notice & What Should You Do If You Receive One?

Ignoring your obligation to pay taxes can lead the federal government to conduct severe legal action against all of your existing assets, current and future income and assets you acquire in the future; this form of punishment is called a federal tax lien.

If you’ve received a certified letter indicating that the federal government has placed an unwelcome Federal ‘tax lien’ on your assets, this article can provide insights into what it means and how to remedy the issue.

What is a Federal Tax Lien?

When a taxpayer falls behind on their federal taxes, they are at risk of having an official public notification filed against them. This document is known as a Notice of Federal Tax Lien and can cause serious consequences for the individual’s ability to enjoy any financial security.

A federal tax lien is an official document filed with the county recorder’s office (usually where the taxpayer lives or conducts business) and the secretary of state’s office (if it’s a corporation or partnership) notifying the general public that a taxpayer has an unpaid federal tax debt.

Lien vs. Levy

For the unaware taxpayer, it is important to understand the difference between liens and levies. People will use them interchangeably, but they are very different. A lien grants the government legal rights over all of your

property. This does not mean they are going to sell your property but it does make it difficult for you when the government has an ownership stake in your assets. Especially if you are looking to sell them, like real estate.

Anything you sell, the IRS will receive its cut before you receive anything.

A levy, on the other hand, is the physical seizure of income and assets. The IRS is the only creditor on the planet that can garnish your income and remove money from your bank account without a court order.

This may affect your credit.

The consequences of an IRS filing a Notice of Federal Tax Lien are significant. This lien is public record, and eventually may show up on one’s credit report which can severely impact their ability to secure further credit in the future as well as lower their credit score.

The effects on your assets.

A federal tax lien restricts your ability to utilize and monetize any existing or future assets – from real-estate, stock investments, automobiles, etc. This means that the IRS is first in line for proceeds if you were to sell any of your assets, before you receive any cash.

The affects on your business.

Protecting your business from financial troubles is important, and a lien can be especially damaging. It attaches to all of your property — including accounts receivable –which could seriously impact the normal day to day operations of your business, leaving you further in debt than before.

Thinking about filing for bankruptcy?

Although filing for bankruptcy may offer relief from debt, it’s important to note that your tax obligations and Notice of Federal Tax Lien still remain in effect. To ensure financial freedom, take steps to address any existing unpaid taxes before planning a successful future.

When a levy is enforced, it can result in the government seizing funds from your bank account or drastically reducing up to 75% of your net pay.

Next Steps

Paying off your tax debt in full is the most effective way to erase a federal lien. Typically the IRS will release the lien within one month of payment. But if you are unable to pay such a large sum, as most people are, at once don’t lose hope – this is where a tax resolution specialist can help.

When it comes to the IRS, navigating legal channels on one’s own is a risky endeavor. The best course of action for those facing tax issues is to seek out expert, professional help by calling an experienced and qualified tax resolution provider like us. With our expertise right by your side, your chances of achieving a positive outcome improve significantly!

Reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem once and for all.

To discuss your needs with a dedicated Illinois attorney, please contact us.