Federal and state tax entities have a lot of authority when it comes to collections. Unlike other creditors, who can merely harass you and notify credit bureaus of your lack of payment, federal and state tax entities can take drastic action to collect what is owed to them. They can garnish your wages, freeze bank accounts, or put a tax lien on you. All of these things can seriously — and often suddenly — negatively impact your life. If you’ve been informed that a federal or state tax entity intends to put a tax lien on you, it’s best to act quickly and defend yourself as soon as possible. You may be able to get the lien removed or negotiate a deal that prevents the lien from ever being instigated. Here’s what you should know.
What Is a Tax Lien?
A tax lien is a document that is filed by a state or federal tax authority and reported to credit bureaus. It does not force payment as a levy does, but it does protect the tax authority’s ability to collect what is owed. Don’t underestimate the power of a tax lien — although it doesn’t allow the authority to force payment, it can destroy your credit more than any other negative item on your credit report. Once paid, a tax lien must be removed from the individual’s credit report within 7-10 years, but this often does not happen. The lien may remain on the report until the individual takes an active role in providing the credit bureau information that the lien was paid and pushing for the removal of information from the report.
More importantly, a tax lien allows the government to gain legal rights to your property until the taxes are paid. If you own a home or land and a tax lien is filed against you, the state or federal government — or in some cases, both — has legal rights to your home. You must pay your taxes to get the lien removed. Or, worst case scenario, the government will seize your property and liquidate it to meet your tax obligations.
Preventing a Tax Lien
The best defense in the case of tax liens is prevention. If you can’t pay your taxes up front, set up a payment plan with the state or federal tax authority as soon as possible. Be sure to ask that the payment agreement satisfies their requirements to avoid a tax lien. If the lien is already in place, you can still set up a payment agreement and while the lien will likely stay on your credit report, if the government can see that you are actively paying your balance down, they are not likely to seize your property.
Obtaining Legal Representation for Tax Liens
Both federal and state tax liens can be complicated and there’s a lot at stake. Anything of value that you own can be included in a tax lien and liquidated if the government chooses to do so. Contact Tribute Tax Defense for aggressive representation to protect your interests. Fill out our online form or call us at (713) 497-1841 to learn more or to book a free consultation.