What Is A Federal Tax Lien?A federal tax lien is a type of security interest which the law imposes on movable or immovable property so as to recover unpaid taxes. When a tax lien is imposed, it gives the Internal Revenue Service (IRS) a legal right over the property. This implies that they can claim the property to reclaim unpaid taxes or regard it as security for payment of taxes. A Notice of Federal Tax Lien filed by the IRS is a public announcement that says that it has claim to the tax payer's property. This also includes any property that may be acquired after the lien is filed. Federal tax liens cover the entire property of the tax payer. This includes tangible property like houses, cars, etc. as well as rights to property like accounts receivable. A tax lien is imposed following a well defined procedure. First the IRS assesses the liability .Then a Notice and Demand for Payment is sent. This lets the tax payer know the details of the dues. It is only when the tax payer does not take action within the specified time that a federal tax lien is imposed. It is possible to appeal against a federal tax lien on several grounds. For example the lien may have been filed when the tax payer was in bankruptcy, the time period for collection of the tax may be over or the taxes may have been paid earlier. In such cases a Collection Due Process hearing is held and a ruling is made by the IRS Office of Appeals. A federal tax lien can be lifted once the tax payer pays the dues or submits a bond promising to pay within a certain time period. If the conditions set by the IRS are met satisfactorily, a Release of the Notice of Federal Tax Lien is issued. The lien may get released routinely after 10 years if the IRS has not filed any more liens. All federal tax liens do not culminate in a release. Some may be withdrawn on grounds like early filing, incorrect procedures or when withdrawal is seen to be in the best interests of all concerned. Avoiding a federal tax lien by resolving tax liabilities quickly is very much in the interest of the tax payer. Having a tax lien imposed means that the tax payer's credit ratings get adversely affected and it becomes very difficult to obtain house loans, credit cards or even lease property. The tax payer also becomes liable for a higher amount. In addition to the unpaid taxes the tax payer also has to pay the interest,the fees that have been incurred to file and release the lien and any other additions that may have accrued. |