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What is a tax lien?

On Behalf of | Oct 30, 2020 | Tax Law |

Every year Americans are required to file their federal income taxes by the stipulated annual deadline. This year, that deadline was extended due to the unprecedented circumstances of the worldwide pandemic. Individuals living in the District of Columbia metro area may now struggling to pay off the tax bills that they received from the government.

When a person fails to pay their taxes as they are due, they may face collection efforts from the Internal Revenue Service. Those efforts can include liens on tax debtors’ property. This post will discuss liens and steps individuals can take to avoid penalties on their unpaid federal income taxes. This post does not provide legal or financial advice.

Before the lien: Options for dealing with tax bills

A lien is not the first step that the IRS takes to collect an individual’s unpaid tax bill. The individual will first receive notice of their tax assessment and a due date for payment. If they do not make a full payment by that date, they may have interest and penalties assessed to their tax total.

If a person cannot pay their tax bill in full, they may be able to set up a payment plan with the IRS to pay down, over time, what they owe. A tax attorney can help their client explore this option for avoiding further tax bill collections’ efforts. Other options, such as claiming financial hardship and seeking a payment delay, may also be available to individuals.

The purpose of a property lien

If an individual does not contact the IRS to set up payment plan or to seek other methods of tax relief, and they do not make any payments on their tax bill, the government may attempt to secure a lien against the individual’s property. A lien gives the government the right to proceeds from the sale of the individual’s property in satisfaction of what the individual owes in unpaid taxes.

A lien can impact a person’s credit score and financial stability. It can alter how they approach economic decisions and what they are able to purchase in the future. Avoiding an IRS lien is the goal of many who owe money to the IRS. A tax attorney can support the concerns and questions of those who wish to learn more about this important topic.