Understanding A Notice Of Federal Tax LienWhen a tax payer accumulates unpaid taxes the IRS can issue a tax lien on the taxpayer's property in order to claim the back taxes. This is done through a Notice of Federal Tax Lien. What is a Notice of Federal Tax Lien (NFTL)? When the IRS decides to issue a tax lien it files a Notice of Federal Tax Lien. This is a public announcement that the tax payer is defaulting in tax payments and that he owes money to the IRS. By issuing this notice the IRS ensures that it has prior claim over the tax payer's property. If a situation arises where the property has to be disposed of to meet all the debts of the person, any other creditor who has secured their interests earlier will get priority over the IRS when it comes to repayments. However any creditor who lays claim later on will not get preference over the IRS. How is a NFTL filed? A Notice of Federal Tax Lien is filed with the County Clerk in the area where the tax payer resides. Before filing a Notice however the IRS will inform the tax payer about the pending dues and request payments several times. It is only when these requests do not bring about any concrete action that the IRS takes the step of filing the Notice. Usually the larger the amount of the tax liability the faster the IRS files the Notice. The IRS files the Notice after it has assessed the tax payer liability and has sent him a Notice and Demand for Payment. If the tax payer ignores or refuses to pay the debt within a period of 10 days of receiving the notice, the IRS goes ahead with filing the Notice. What does a NFTL cover? A Notice of Federal Tax Lien applies to all movable and immovable property of the tax payer. This includes tangible assets like houses, cars, bank accounts, etc as well as intangible ones like any property that the tax payer may acquire in the future. In short, it covers EVERYTHING the tax payer owns! How does a NFTL affect the tax payer? When a Notice of Federal Tax Lien is filed against a tax payer, it becomes public knowledge that he or she has a substantial amount of taxes pending. This information is accessible to all who may be connected with the tax payer including creditors, banks, customers and others who do business with that person. The tax payer's credit rating gets affected as the Notice of Federal Tax Lien appears on his or her credit report. This can seriously influence the person's credit worthiness and they may find it difficult or even impossible to get loans, apply for new credit cards or take out a mortgage. |