The idea of a tax lien can be pretty scary. Of course, you don’t want to be on the wrong side of the federal government.
But what is a tax lien? How do you avoid getting a tax lien? And how can you get rid of a tax lien?
Avoiding a tax lien may not be “easy” if you’re having financial trouble. However, avoiding or eliminating a tax lien is relatively simple.
What Is a Tax Lien?
If you don’t or can’t pay your taxes, the government can place a hold on your assets. That’s a tax lien. Your assets may include your car, home, bank accounts, or business.
The Consequences of a Tax Lien
The consequences of a tax lien can be intense. You can’t get rid of a tax lien through bankruptcy. In fact, if you file for bankruptcy, the IRS will insist on being paid before any of your other creditors.
A tax lien can impact your ability to get new credit, your property value, and your credit report. You might even lose access to your bank accounts.
Your assets will be frozen. This can be especially bad for small business owners who rely on lines of credit for inventory or bills.
Additionally, a tax lien becomes a matter of public record. That means that anybody can find out you owe the government money.
What’s the Difference Between a Tax Lien and a Tax Levy?
Many people confuse the terms “tax lien” and “tax levy.” A tax lien is a document from the government freezing your assets. You can’t sell your home or open new lines of credit.
On the other hand, a tax levy is the forced collection of money you owe. Your assets may be seized, or your wages may be garnished.
One of the main reasons you must avoid and eliminate tax liens is because they can lead to tax levies. Dealing with a tax lien is difficult, but not as difficult as having your assets seized.
How Do I Avoid a Tax Lien?
The best way you can prevent a tax lien is to pay your taxes on time. If you can, pay your estimated taxes quarterly each fiscal year. If that’s not possible, plan and pay them all the next tax season.
If you can’t afford your entire tax bill, you can set up a payment plan with the IRS. There are two different types of installment agreements based on how much money you owe.
Guaranteed Installment Agreement
If you owe the government less than $10,000, you can set up a Guaranteed Installment Agreement. That means you agree to repay the IRS with monthly payments they have agreed to. The length of the installment and the amount of the payments will vary based on how much you owe.
By agreeing to a Guaranteed Installment Agreement, you can avoid a tax lien.
Streamlined Installment Agreement
A Streamlined Installment Agreement is like a Guaranteed Installment Agreement. However, the Streamlined Installment Agreement is for people who owe $10,000-$25,000 in back taxes.
If you owe more than $25,000, the only way to avoid a tax lien is to pay the balance to under $25,000. From there, you can set up a Streamlined Installment Agreement.
File an Offer in Compromise
If you’re experiencing extreme financial difficulties and can only pay part of your balance, you may file an Offer in Compromise (OIC/). An OIC lets you settle your debt with the IRS for less than you owe. It’s based on what you can currently afford to pay.
The IRS is very picky about accepting an OIC. They may still put a tax lien on you while they decide whether to accept it.
You should communicate with a tax professional before filing an IRS Form 656 for an Offer in Compromise. They can help you handle the process and increase your odds of being approved.
How Do I Get Rid of a Tax Lien?
Once you have a tax lien, the only way to get rid of it is to pay your balance, get an OIC, or prove the lien was an error. That can be quick if you have the money on hand. However, a payment plan can take years to remove a tax lien.
It may be worth it to use a credit card or personal loan to pay off your tax balance now. You will pay credit card interest, but you will avoid the hassle of a tax lien and may save money on penalties and interest from the IRS.
There are two ways to get rid of a tax lien.
Withdrawing a Federal Tax Lien
If you believe a lien has been filed against you by mistake, contact the IRS. If you can prove that the tax lien was filed against you by mistake, the federal tax lien will be withdrawn as if it never happened.
Releasing a Federal Tax Lien
Once you pay what you owe or set up an installment agreement, the lien against your property can be released. The lien is usually released within 30 days.
Secure Financing to Get Rid of a Tax Lien
Don’t have the money to get rid of your tax lien? First Union Lending can help.
First Union Lending offers 9 different types of loans. You can save yourself a lot of hassle if you use one of our loans to avoid a tax lien. A loan from us can save you a nightmare dealing with the federal government.
It’s easy to get a loan through First Union. You can communicate with one of our loan specialists by calling 863-825-5626. They will help you decide which loan will be the best to avoid a tax lien.
There is no risk of applying for one of our loans. Applying for a loan won’t affect your credit. You can even get the money as soon as the same day you apply.
Avoid or get rid of your tax lien now. Contact First Union Lending today!
Let's do this together!
Are you ready for greatness? First Union Lending is here to help you achieve your financial goals.
Let's Do this together!
Are you ready for greatness? First Union Lending is here to help you achieve your financial goals.