How to Deal with a Lien Notice from the IRS

April 15, 2019

If you are worried about back taxes, you are not alone. In fact, in 2009, approximately 8.2 million Americans had a lien notice served to them by the IRS. Today, we will explain everything you need to know about IRS tax levies and liens and how to handle them quickly.

Levy vs. Lien: What’s the Difference?

Many people use the terms lien and levy interchangeably. However, there are important distinctions. A lien is a document the IRS files that protects the government’s ability to collect money. A levy, on the other hand, is forced tax collection. The most common form of IRS levy is wage garnishment – receiving a portion of every paycheck for the purpose of reducing your tax liability.

How to Prevent a Lien

People may feel that the only way to prevent the IRS from filing a lien is to pay their entire tax bill before the IRS has the chance to file. However, with the right team behind you for assistance, it is much easier to set up an installment agreement that meets the requirements of the IRS to avoid a lien being filed. This installment agreement may be either a streamlined installment agreement or a guaranteed installment agreement.

Guaranteed installment agreements are made for outstanding balances of $10,000 or less. A streamlined installment agreement is put into place for balances of $25,000 or less. If your outstanding balance is over $25,000, you will need to pay your balance down to $25,000 before you can prevent a lien.

Do I Have a Lien Filed Against Me?

The IRS does not normally notify you before it files a federal tax lien against you. Rather, you will receive a Notice of Federal Tax Lien after it has already been filed with your county. These federal tax liens are effective starting 10 days after the IRS issues a written demand to pay all outstanding taxes. If they send you a letter on June 1, you have until June 11 to avoid a lien being filed. When you receive the letter in the mail is irrelevant.

How to Remove a Lien

There are four common situations that lead to the IRS removing a lien. The IRS, just like every other organization, makes mistakes. Sometimes, the IRS files a lien against the wrong person. In this case, your lien will be withdrawn.

Other circumstances under which liens are removed include paying your outstanding balance in full, satisfying your back taxes in some other way, such as filing a successful offer in compromise, or having an unenforceable lien. The expiration of the 10-year statute of limitations is the most common cause of a lien being unenforceable.

Withdrawal

If a federal tax lien is filed in error, the lien will be removed after an IRS agent reviews your account history to verify the error and prepares the required withdrawal paperwork.

Release

If the back taxes you owe are legitimate, the IRS will release the lien so that it does not encumber your property anymore. Once the lien is released, your county records will be updated. However, the lien will remain on your credit report for as long as 10 years. You can expect your lien to be released within 30 days of creating a streamlined or guaranteed installment agreement or paying all outstanding tax obligations.

Resolve Your Back Taxes Today

To learn more about the difference between an IRS levy and lien, or to get help resolving your back taxes, contact Geaux Tax Resolution today. With over 35 years of experience resolving tax issues, we are confident that we can resolve your tax issues with the IRS quickly and effectively.