Many people think that a tax lien is a permanent matter and can never be removed or even dealt with. So what do people do? They avoid the issue and find a way to work around the lien so that they can continue to live. I am writing this blog so that you avoiders trying to find a way around your tax liens can understand what a tax lien really means and what you can do about it so you need not be an avoider.
Let us start by understanding what a tax lien really means. I am going to use the IRS lien definition because state governments use the IRS a guide to liens and the law to enforce liens. The IRS defines a lien as Sec. 6321. LIEN FOR TAXES:
“If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person.”
What does this mean? It means that if you fall behind on your taxes and avoid the issue, the IRS will place a lien on everything you own. You might say, “I only have my personal goods and my car and no house.” The problem with that way of thinking is that they still have the liens against your personal property and any future property you buy. What I mean is that everything you own—books, ipad, clothes, computer, food and etc. You get the point.
Tax liens are serious business. Do not ignore the reality you are in. The problem with Tax Liens is that they are good for 10 years and the IRS/State can renew them for another 10 years. The IRS/State will renew them if they have not heard from you or if the options to remove the liens are not taken.
The options to remove a Tax Lien are several folds. You can pay the taxes owed in full and the IRS/State will gladly remove the liens. IRS Suggestions On Resolving Tax Liens. Of course, they will. You can look at the link noted and see how the IRS is suggesting that assets be sold and how they can help you do so in order to get the tax debt paid and lien removed.
You see, the IRS/State want paid and will take your assets to do so. How can this be and how can you stop it? The first step is not ignoring the reality you are in. A Tax Lien destroys your credit even if you find a way to work around it and continue to live. You say “I can deal with the way I am living.” The problem is that the IRS/State will catch up with you and will force you to sell property or even worst you will never own property in your lifetime. You have to ask yourself is living a life working around bad credit so to avoid dealing with your reality worth it?
How you can stop a Tax Lien and live a life of Financial Health is simple but you need to seriously consider filing a Chapter 13 bankruptcy case. In a Chapter 13 bankruptcy case, Tax Liens can be stripped from both personal and real property. BANKRUPTCY STRIPPING CODE. Pursuant to section 506 of the Bankruptcy code, Tax Liens can be removed from personal property and real property in a Chapter 13 case. Once the lien is removed from your property, often the taxes owed are fully unsecured and dischargeable without the need to make one payment towards them but for the unsecured portion you agreed to through your plan. What is the unsecured portion? It is a percentage of the total unsecured debt you owe that you can afford. Such as 10% owed on a total debt of $40,000.00. The amount to be paid would be $4000.00 over 60 months for a total monthly payment of $67.00 a month. At the end of 60 months, your entire tax debt would be discharged and you can live a life debt free and Tax Lien free.
Another way of dealing with tax liens is an offer in compromise. An offer in compromise may lead to the removal of a Tax Lien. Why I say “maybe” is because an offer in compromise is not regulated by a court order like in a Chapter 13 case. Offer in compromises are usually resolved within a department and are subject to that departments decision on how to deal with the liens and your payment arrangement in order to get the liens removed. Remember the IRS/State’s goal is to be paid; therefore, the option is a good one to consider but is less absolute for it is not govern by law and court order.
If you have a Tax Lien, it is a permanent thing if you do not take up one of your options to deal with it. A Chapter 13 case is the best way to deal with a Tax Lien for it strips the Tax Lien from your property and allows to save your property and debt with your Tax Lien and debt once and for all. As always, you should seek professional help for your particular circumstances.