Understanding IRS Tax Liens

Elizabeth Rosen
by Elizabeth Rosen, Contributor

 

Regardless your situation, it is always best to file and pay your taxes as soon as you can. If you make no effort to pay your taxes, the IRS may levy your bank accounts and wages, or take other assets. Additionally, the IRS may file a Notice of Federal Tax Lien on a delinquent taxpayer which can have a negative impact on their credit rating.

According to the IRS, “If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If effort is still not made to pay the bill, or make other payment arrangements, the IRS could also take more serious enforced collection action, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing.”

When you fail to pay property tax when it is due and continue to avoid doing so, a tax lien may be placed on your property. At this point, the only way to have the lien released is to pay your property tax bill in full or make arrangements to do so via a payment plan. If the IRS, state, or local tax bureau realizes that you have an unpaid property tax liability, they will send you a “bill” in the mail. They expect you to pay the amount due or make other arrangements as soon as possible. If you do nothing, they have the right to file a notice of tax lien.

Did you know that tax liens on real estate stay with the land? In simple terms, this means that a new owner can become responsible for debt incurred by a past owner. As a buyer, this is an important note to keep in mind. Most people do not want to get involved with a home that has a tax lien attached to it.

www.banks.com/taxes/beware-of-tax-liens-on-your-property

www.banks.com/taxes/filing-a-late-tax-return

www.banks.com/taxes/tax-forms-payment-options

www.irs.gov/irm/part5/irm_05-017-002

www.irs.gov/newsroom/article/0,,id=201881,00

www.usatoday.com/money/perfi/columnist/block/yourmoney