A federal tax lien is a device that is used by the Internal Revenue Service to help collect late taxes. If you are behind on your federal taxes, the IRS could place a lien on your property to guarantee the eventual payment of your back taxes.
Federal Tax Lien
A federal tax lien is an encumbrance that the IRS can put on a piece of property. With this type of encumbrance, it will be impossible to sell a piece of property without paying off the debt first. For example, the lien could be placed on your home and you would have to use the money from the sale of your house to pay back the IRS before anything else can be done with the money.
If a piece of property is owned jointly with two or more parties, the tax lien could affect all of them. This is true even if the joint owners do not all owe the tax liability. If one of the joint owners has a tax liability that has not been paid in the IRS places a lien on the property, it will affect the other owners of the property. The property can still not be sold unless the tax obligation is fulfilled.
Removing the Lien
Once a lien is placed on the property, you can potentially get it removed before selling your property. If you want to have the lien removed, you need to pay the tax bill to the IRS. Once you pay the tax bill that you owe in full to the IRS, they will begin the process of removing the lien. It can take up to 30 days to have the lien removed from your property.
If you cannot afford to pay the full tax liability, you may be able to work out a payment arrangement with the IRS. In some cases, they will accept an offer in compromise. This is a scenario in which you offer to pay less than the full amount owed to settle your account. Another option that you might consider is the installment agreement. This allows you to make periodic payments to the Internal Revenue Service until your bill is paid. With this arrangement, you will also have to pay interest on the tax debt.
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