Tax lien – a dreaded word to the average American taxpayer. However dreaded the words are, many do not know what a tax lien is, or what to do when faced with the potential of having one placed against them.
A tax lien occurs when the IRS has determined that a taxpayer owes additional taxes and has not responded to notifications that these taxes are required to be paid. A tax lien means that the IRS has placed any current or future assets a taxpayer has under primary ownership of the U.S. government. If the asset is then sold, the proceeds from the sale of the asset would go towards first paying off the lien, and then any remaining proceeds would go to the taxpayer.
Avoiding an IRS tax lien is arguably the best course of action for someone who either determined that they owe additional federal taxes themselves, or is notified by the IRS that additional taxes are owed. However, many taxpayers do not know what course of action to take in order to avoid having a tax lien placed against them, especially if they do not have the financial means to pay any back taxes owed. However, there are many different options available to taxpayers that can help them avoid an IRS tax lien.
If a taxpayer is notified by the IRS that additional taxes are due, the first course of action is to verify that the information the IRS has is correct. In some cases, the IRS has incorrect or incomplete information. For example the IRS may be notified that they have proceeds from a sale of stock but has not been provided the cost of purchasing the stock, and is basing its tax assessment solely on one aspect. By investigating the information the IRS is using to determine that additional taxes are owed, a taxpayer may be able to either reduce or eliminate entirely the amount of taxes the IRS original assessed.
If a taxpayer determines that the IRS assessment is correct, or they have determined themselves that they owe additional taxes, then the best option would be to pay the taxes. If they are unable to make the payment, then the next option is to negotiate making payments on the past due assessment. However, additional interest and penalties will accrue during the payment period. Finally, the last option would be to negotiate an offer that is lower than the original amount owed. The IRS will require that an Offer-In-Compromise (IRS Form 656) be filed, which includes providing personal financial information to the IRS. This information will be used to determine if the taxpayer’s offer will be accepted.
If you ever face the possibility of having a tax lien filed against you, and you are unable to determine the next course of action, contacting a qualified tax professional for assistance is often your best option. Contact or call RJS LAW at (619) 595-1655 to schedule your consultation today.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.