Tax Liens: What They Are and How They Affect You?

Do you still owe the government money? If yes, there is a very high chance that they are going to issue a tax lien. A tax lien can have devastating effects on your financial status. It is a legal claim that comes from the IRS on a taxpayer’s property, including their personal property, real estate, or financial assets – in order to acquire the payment of back taxes they owe in the first place.

Tax liens are usually filed by the Internal Revenue Service (IRS) or State tax agencies which often have the power to become a matter of public record. It can have incredibly concerning consequences for the credit score of a taxpayer and their future ability to obtain any form of loan or credit. In fact, if you owe payroll taxes to the government, you must understand your options for payroll tax settlement in order to avoid serious consequences which may come with unpaid taxes. 

In fact, for small business owners, tax liens can cause an impact beyond their control. Avoiding it in the first place is highly encouraged for not only small business owners but general citizens of the country as well. But, if dug a little deeper, what exactly is a tax lien and how does it work? It is about time to let an IRS tax professional do the job for you! So, let us now walk you through the nooks and crannies of how a tax lien works. 

What is a Tax Lien?

Tax liens are the legal claims put forward by the IRS on the taxpayer’s property to acquire back the taxes owed. It can be anything between financial assets, real estate, and more. In case you owe money to the IRS, you might as well receive an intent to levy notice, which simply implies that the government is planning to seize your assets in case you do not take immediate action to resolve the debt soon.

Tax liens are often imposed when an individual or business fails to pay their pending taxes, causing their financial status to tremble if not paid any sooner. It gives the IRS the power and authority to seize the assets of the taxpayer in order to satisfy the unpaid tax debt. This can also make the process of selling the property more sophisticated since the tax lien must be satisfied before the sale can be completed. This does sound intimidating on many levels. And, like a lien, if you’re struggling with a payroll tax debt, a payroll tax settlement might as well be the solution you need to explore.

For the most part, a tax lien can show on the credit report of the taxpayer for almost 10 years, even post the clearance of the debt, which can potentially make it more difficult to obtain credit or loans at reasonable pricing. Tax liens are a matter of serious concern, which have the power to turn the life of individuals upside down. And that is enough reason why it should be taken very seriously. 

Because tax liens can widely impact the financial health of many, it should be avoided at all costs, to begin with. Making it important to stay current on tax payments, get in touch with those who know the ins and outs of how the system works and what can cause you distress.

How Tax Lien Affects Your Business?

A federal tax lien can potentially have several effects on your business. A tax lien often just attaches itself to your business assets, including but not limited to your property, vehicles, and more. It also has the power to attach to any asset you obtain while the lien is still in the loop.

A tax lien can make the purpose of selling or transferring ownership of your business very, very challenging because it forms a cloud on the title of your business in reality. Any potential buyer or investor might as well hesitate to buy your business, or can otherwise offer to price far less than what should be owed only due to a tax lien.

Tax liens on your business can have an impact nobody can control. It can cause a severe plummet in your business’ financial well-being, reputation, and ability to operate. The IRS files the lien notice on public records – clear to the sight of creditors. It has the potential to impact your credit score and your ability to obtain credit. There have been some cases in the past where the IRS held corporate officers, alongside their spouses, for unpaid and pending taxes.

How Tax Liens Work?

Tax liens are forms of legal claims that have been raised against any acid or property due to unpaid taxes. When a taxpayer fails to pay the amount they owe, the IRS or the state taxing authority can potentially activate a lien on their property in order to secure the unpaid taxes. This simply indicates that the taxpayer’s property has been used as collateral for the pending amount they owed to the government.

The IRS Notice of Tax Lien will further shed light on the amount and demand you to pay it. In case you fail to pay within a timeline of 10 days after the IRS has forwarded you the first notice, a tax lien automatically comes into the loop. The IRS has the authority to file a Notice of Federal Tax Lien in public records, which lets other governments and creditors view it.

Once the lien begins, the taxpayer’s credit score depletes quite largely, as the lien is a matter of public record and potentially can be reported to credit bureaus. This often is why it becomes so difficult to obtain any form of credit, loan, or other financial help.

It is also important to note that a tax lien placed on your asset can prevent you from selling or refinancing until and unless the very debt is fully paid off. Seizing and selling the property to recover unpaid taxes is usually the very last resort.

Bottom Line

Tax liens can indeed cause you heavy financial distress. But what’s more important is that it can be prevented if you take the right step on the first day and pay your pending dues! Tax liens have a significant impact on the financial status of both a taxpayer and a business equally.

It can cause a kind of turmoil not many can imagine. The IRS has the authority to place a lien on your property, which indicates that you will further be unable to refinance or sell the property without first settling the debt.

Either way, it is very important to remember the drastic plummet your credit score is going to experience when a lien is placed, making it harder to get future loans or credits! It is enough reason to avoid a tax lien at any cost. Want to safeguard your assets and property from the government? Make sure you pay what you owe! 

It is very true that at times like these, things can become incredibly messy, making it slightly vital to get in touch  with an IRS tax professional! So why wait?


Mr. Joshua A. Webskowski

Joshua specializes in successfully resolving cases in all areas of tax resolution including liens, levies, & other IRS collections cases.

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