IRS liens explained

The importance of paying tax obligations on time has been discussed on previous posts here, as have the various partial payment plans offered by the Internal Revenue Service. Even if an Austin resident is not able to pay their taxes, by informing the IRS and working with them to figure out a way to make payments a person can potentially avoid penalties. While many think that the IRS only imposes financial penalties, that is not the case. The IRS can also file a lien against a defaulter’s property.

In a document filed with the county clerk’s office, a federal tax lien is the government’s way of attaching a legal claim against the person’s property, both real and personal. A lien is attached only after the taxpayer has been assessed to owe a certain amount and the IRS has demanded it be paid, but the taxpayer has not done so in a timely manner. If property is sold with a lien attached to it, the IRS is paid out of the sale proceeds.

It is possible to get rid of a lien by paying a tax bill in full. The lien is released 30 days after the tax is paid. When it is not possible to do so, there are other options for reducing the lien’s impact. First, it might be possible to discharge a lien from specific property if it qualifies under IRS Tax Law. It might also be possible to subordinate the lien, which does not remove it, but allows others to move ahead of the IRS, making it easier to get a loan or a mortgage. Lastly, it might also be possible to withdraw the public notice of the lien, assuring other creditors the IRS is not competing with them.

A number of options are in place to help taxpayers meet their obligations or alleviate the impact of non-compliance with tax laws.