What Is an IRS Tax Lien?

Many taxpayers have made costly mistakes leading to unwanted scrutiny by the Internal Revenue Service. Whether individual taxpayers or business owners, the rules are the same—you get behind on your taxes and you face an IRS tax lien. Some are stunned, wondering---what is an IRS tax lien? You need the help of a qualified tax attorney to understand how tax liens operate and what can be done to ease the process of paying those back taxes and getting out of trouble. A tax attorney can put your mind at rest while finding the best resolution to your tax debt problems.

Understanding the legalities of an IRS tax lien

A tax lien is an attempt by the IRS to collect a debt, and should not be taken lightly. The first part of answering the question "what is a tax lien?" can be summed up as follows: A lien is attached to all your property, including your house and your car, and all your rights to your property. Business owners take note—this includes accounts receivable. Before filing a federal tax lien, the government must meet several legal requirements. After first assessing the liability, the IRS should then receive a deposit or acceptable bond in the amount equal to its interest in the property. If you are selling your primary residence, you may be entitled to a relocation expense allowance. You may instead want the IRS to subordinate its lien, which gives it a lower priority over liens filed by other creditors.

Subordination might be needed in cases where a creditor refuses to lend unless their lien is satisfied first, before the IRS. In turn, the IRS will allow this if it is reasonable, if you give the IRS the dollar value of the lien, and if you prove how subordination would speed up the tax collection process. But if the IRS chooses to enforce its collection authority, it does so through a levy, which allows the government to attach all monies held by a third party. While a lien is security for a tax debt, a levy goes one step further, seizing property to fully or partially satisfy the tax debt. Levies can be specifically used to take wages, commissions and other income. For more detailed information on what is an IRS tax lien and how it relates to the collection process, contact your local IRS office.

Accuracy and honesty and how they apply in this situation

In your quest to gather information on exactly what is an IRS tax lien, it is vital to remember one thing--be accurate and truthful. Sometimes during the negotiation process the taxpayer will make an offer of what they can afford to pay, in an attempt to reach a settlement. If the IRS finds after accepting the offer that anything was misrepresented, the offer may be revoked. In this case, payment in full will be demanded. An honest agreement is always needed when dealing with the IRS, and whether innocent or intentional, any inconsistencies will raise a red flag. To avoid further problems, have your accountant or someone familiar with your financial affairs help in this area.

Due dates, forms and filing for a tax extension

If you’re dealing with a lien during the tax season, there are ways to keep abreast on that front. Taxpayers facing that situation are advised to request an extension if they cannot complete their return by April 15. Filing form 4868 gives an automatic six-month extension. Requesting your tax files be transferred to a different office may also buy some time, as that automatically suspends collection while the file is being transferred. Usually such requests will be honored if the taxpayer has a valid reason for it. The IRS will also suspend collection if you tell them you wish to consult with an attorney. Hopefully after all the research you’ve done on what is an IRS tax lien and how to cope with one, you&am