Tax Solution: Lien Release

Used When: You want an IRS tax lien off of your record, so that you can improve your credit or borrow money.

What’s in a tax lien, and why does the IRS file it?

A lien is simply a declaration to the public: you owe the IRS money!

The problem with a tax lien is threefold.  First, everyone finds out about.  Credit reporting agencies sniff out tax liens in a New York minute.  And once a tax lien winds up on your credit report, it can sink your credit score by up to 100 points!  Expect interest rates to go up rapidly, if you are still able to borrow.

The second problem with a tax lien is that you can’t sell your assets.  Well, you could technically try…but few people are interested in buying a property that is encumbered by an IRS lien!

The third problem is that a tax lien can be brought to a judgment.  What does that mean?  Well normally, the IRS has 10 years to collect the taxes it’s owed.  Let’s say the IRS files a lien, and it’s getting close to the expiration of the statute of limitations.  What does the IRS do?  Well, it goes to court and gets a judgment on the lien.  This gives the IRS 20 more years to collect your past-due taxes!

Needless to say, you do not want to have a tax lien outstanding against you!

And here’s a mistake that some taxpayers with liens make that cost them dearly!

Many people think that a lien simply being “released” is good enough.  A lien is released when you either pay off the amount you owe, or the statute of limitations expires.  If you think that this is all you need to do, you are making a HUGE mistake!

A lien being “released” still leaves it on your record!  What you need to do instead is to have the lien officially withdrawn.  You can do this if you play your cards the right way, and if you are successful, the IRS essentially says “yep, we’re taking back that we even filed a lien in the first place”.  This will get the lien off of your credit report faster, and in many circumstances will allow your credit score to go back up.

Solving your lien problems means you have to solve your tax problem first.

A lien is just a symptom of an underlying tax problem.  And don’t get me wrong, no one wants to have a lien against them!  But ultimately, if you are able to resolve your underlying tax issue, the lien being fixed will be a natural (positive) consequence of your actions.

Some types of tax resolution allow you to have the lien withdrawn even before you pay off the full amount owed!

Luckily, the IRS does not always force you to 100% pay off what you owe before being willing to withdraw a lien.  If you are facing a problem with a lien and want to see how it can be resolved before you pay off the full amount, I encourage you to give us a ring or apply for a free consultation.