What Does It Mean to Have a Lien on Your Home?

September 1, 2021

When you first start accruing tax debt, your situation might not yet be very serious. However, by not dealing with the issue, you can face significant consequences and ultimately even lose your primary residence. The IRS can place a home lien on your property and, if you fail to pay what you owe, gain the right to it. While this is rare, it is a real concern for some families, and you should take all measures possible to prevent it.

Once a lien has been placed on your home by the government, the only way to get rid of it is to pay off your tax debt or to negotiate with the IRS and find an alternative solution. A tax resolution specialist can help you to navigate this difficult situation and find a solution that doesn’t cause you hardship. Today, let’s explore what a federal tax lien is and how you can prevent the loss of your home.

What Is a Home Lien?

In essence, a lien is a legal claim against your home by your creditor. This is very common, and almost everyone who has a mortgage has one because the person or entity who financed your home has a legal right to it if you stop your repayments. This kind of lien isn’t a bad thing, and it is removed once you have fully paid off your home, so that you have full title to your property.

Unfortunately, there are other kinds of liens that are more of a problem, and they can impact your future and credit score. They are usually involuntary, which means that you have not consented to them, but they have been imposed on you because you failed to pay your debts. Most types of creditors can place a lien, and this includes government entities such as the IRS.

Why Does the IRS Place a Lien on a Home?

Sometimes, the IRS may place a lien on a taxpayer’s home because they have not paid their federal property taxes, income taxes, or business taxes. The purpose of this arrangement is to protect the government’s interests so that they can gain access to the money that you owe them. If the amount you owe is greater than the value of your property, other assets such as your vehicle or your securities could also be affected.

Unlike a normal lien related to your mortgage, a federal tax lien can affect your credit, so you may find it hard to take out a loan afterward. It can also affect your business negatively because all business assets can be included in it, even your accounts receivable. Although you can get many kinds of debt dismissed through bankruptcy, this doesn’t always apply to a tax lien, which means that you might still have to pay what you owe to get rid of it.

How Does this Happen?

You won’t receive a federal tax lien overnight because there is a process involved. This starts with the IRS assessing your liability and stating how much money you owe them, then sending you a bill to inform you about it. This is called the Notice and Demand for Payment. If you pay them at this point, you won’t face any further issues, and your home and assets are not at risk.

However, if you refuse to pay or you are unable to do so, they will file a public document called the Notice of Federal Tax Lien, which serves to notify other creditors that the government has a right to your property. As part of the subsequent proceedings, you will be visited by an officer, and if the problem persists, the IRS may eventually take action to seize your property.

How Can You Get It Removed?

There is only one failsafe way to remove a federal tax lien, and that is to pay off your debt in full. Debtors who are able to do so shouldn’t delay because they may face further consequences if they don’t. However, many people may have trouble paying what they owe due to financial difficulties or a decline in their business. In such cases, it’s important to still take action and let the government know that you are currently unable to pay.

There are several options that can help you to resolve your situation. For example, you may be able to spread out your payments over several months or even years, making it easier to comply. Alternatively, there is a possibility that the government will let you pay less than you owe. This offer in compromise is rare, but you might qualify if you can demonstrate that paying would make it difficult for you to support your family.

What Should You Do? 

Now that you understand what a home lien is and why the IRS might place one on your property, you might wonder what you should do once you receive the letter from the IRS. In most cases, the best course of action is to contact a specialist who can help you to navigate this difficult situation. They can review your financial situation with you and figure out the best way to move forward, then negotiate with the IRS on your behalf.

Contact a Qualified Tax Resolution Specialist 

A lien is a serious matter because you could lose your home and other assets in the worst-case scenario. For this reason, you should always consult a professional before attempting to resolve the situation on your own. They can make sure you lay out your case in the best way possible and don’t make a mistake that could cost you a lot of money in the long run.

A competent professional will first invite you to an initial consultation and listen to your concerns. They might ask you how much you owe, what caused the debt to accumulate, and whether you’ve already thought about ways to pay it off. Then, they will develop a plan and get in touch with the IRS to discover what your current options are. Finally, they will negotiate and find the best possible solution, so you can move forward without further issues.

Review Your Situation and Gather Evidence 

Before you get in touch with your tax resolution specialist, take some time to review your financial situation and gather all relevant documents. The more prepared you come to your first meeting, the faster you can be helped. Make sure you know exactly how much you owe and how long overdue the payments are. 
Bring any evidence that you can find, including your current income and business expenses. Even if you’re not sure how something can help, it’s worth taking it with you just in case. Your tax professional may know of a law or a solution that makes the piece of evidence relevant to your case. 

A home lien imposed on you by the IRS is serious because it gives them a right to your property if you fail to pay your taxes. Usually, this happens to people who have significant tax debt, and the only way to get rid of it is to pay off what you owe. Working with a professional is the best way to navigate this tricky situation and protect your home. Get in touch with us at Geaux Tax Resolution in Lafayette, LA to book your initial consultation with a tax resolution specialist.