Can I get around a tax lien in Newport Beach, CA? Yes, with the right strategy, it’s possible to address and even overcome the hurdle of a tax lien. Navigating tax liens may not be a walk in the park, but with the right understanding, strategic approach, and professional guidance, it’s far from an insurmountable challenge. Whether it’s understanding the basics of a tax lien, differentiating between federal and state tax liens, addressing a tax lien through payment in full or installment agreements, removing an IRS tax lien, protecting your assets and credit, or avoiding future tax liens, Ronald Arthur Stearns Sr. PLLC is with you every step of the way. To speak with an experienced professional from our team, call us today at 949-676-7193.
Understanding Tax Liens in Newport Beach
The term “tax lien” may sound intimidating, and rightly so. In California, a tax lien serves as the government’s legal claim against a taxpayer’s property when they fail to pay the state taxes owed, which can result in a tax levy. This can affect various assets, including real estate, equipment, and intellectual property. Unpaid taxes can, therefore, result in a formidable obstacle for taxpayers.
The Basics of a Tax Lien
A tax lien essentially attaches to all of an individual’s assets, including:
- Real property
- Personal property (such as vehicles, homes, securities, and savings)
This means that the lien secures the government’s interest in your property when you owe taxes. However, not all tax liens are the same. Some are ‘invisible’, not a matter of public record, while others are recorded as a Notice of Federal Tax Lien or Notice of State Tax Lien, accessible by the public.
Think of a federal or state tax lien as a second mortgage or recorded judgment. It attaches to a taxpayer’s current property and any additional assets acquired while the lien is in effect. Given the extensive implications of such a lien, comprehending the disparities between federal and state tax liens becomes imperative.
Federal vs. State Tax Liens
Federal tax liens, issued by the IRS, are a legal claim against all of a taxpayer’s current and future property, while state tax liens in California, issued by the Franchise Tax Board, are specific to California property. Both federal and state tax liens remain in effect until the assessed liability is satisfied or becomes unenforceable after ten years, according to federal law. It’s crucial to remember that while the state does not directly notify credit bureaus, the lien becomes public record, just like irs tax liens.
What happens when both the IRS and Franchise Tax Board have competing liens on the same property? Special rules determine which lien takes precedence in such instances.
Strategies to Address a Tax Lien
Knowing the problem is half the solution. Having comprehended what a tax lien is, it’s time to examine the strategic approaches to manage or prevent tax liens. A tax lien can create challenges in selling assets or obtaining credit, but with a well-thought-out plan or a negotiated settlement with tax authorities, these challenges can be tackled effectively.
Professionals with in-depth knowledge of tax laws can assist in negotiating favorable terms for payment plans or settlements with the IRS or state agencies. They can also implement measures like an offer in compromise to settle taxes for less than the amount owed, thereby avoiding potential liens.
Payment in Full
Going head-on against a problem is often the best strategy. The most direct way to have a tax lien released is by paying it in full. This includes all tax liabilities for the years in question, along with any accrued penalties, interest, and fees.
Don’t expect an immediate release of the lien upon payment, though — there’s a 40-day processing period from the date of full payment, which may be prolonged if payment is made by check. While it may seem like a daunting task, the peace of mind that comes after is often worth the effort.
Installment Agreement
For those who find it challenging to pay the tax lien in full, a payment plan in the form of an installment agreement can be a viable option. After filing their tax return on time, taxpayers can reduce the failure-to-pay penalty rate by entering into an installment agreement with the IRS. Under certain conditions, the IRS may even withdraw a tax lien if the taxpayer enters into such an agreement.
However, to be eligible for an installment agreement, taxpayers must file any overdue tax returns and pay an associated one-time fee added to the tax liability. In certain hardship conditions, taxpayers can also enter into an installment agreement with the California Franchise Tax Board. Regular payments under this agreement can prevent the recording of new liens and halt further collection efforts. However, any default on this agreement can result in its revocation.
Navigating the Removal of an IRS Tax Lien
Knowing how to address a tax lien is important, but so is understanding how to remove an IRS tax lien. This may involve processes such as:
- Withdrawal: removing the public Notice of Federal Tax Lien, distinct from a Certificate of Release of Federal Tax Lien that releases the lien itself.
- Discharge of property: removing the lien from a specific property, allowing it to be sold or transferred.
- Subordination: allowing another creditor to take priority over the IRS lien.
In certain situations, the Notice of a tax lien may be withdrawn after release. Some situations in which the IRS may withdraw a tax lien include:
- If the taxpayer enters into a Direct Debit installment agreement
- If the lien was filed prematurely or not according to administrative procedures
- If the withdrawal of the lien facilitates the collection of tax
- If the withdrawal of the lien serves the best interest of the taxpayer and government.
But going through these procedures can be complex, which is where tax professionals, like Ronald Arthur Stearns Sr. PLLC, can step in. To speak with one of our experienced tax attorneys, give us a call at 949-676-7193.
Discharge of Property
What if you could have a tax lien removed from a specific property? That’s what discharge of property does. If proven that the property no longer serves the government’s interest, it can be removed from an IRS tax lien. The eligibility for this process is governed by provisions in the Internal Revenue Code.
Discharge allows the taxpayer to sell or refinance the property without the tax lien, provided the proceeds are used to pay down the associated tax debt. This gives the taxpayer more flexibility in managing their assets.
Subordination
Subordination is another strategy to handle a tax lien. It doesn’t remove the lien, but allows other creditors to have priority over the IRS. This can be beneficial to taxpayers seeking a loan or mortgage, as it can improve their creditworthiness by giving priority to the new creditor.
Subordination of a tax lien can be helpful in situations such as refinancing a mortgage under the principle of equitable subrogation, where a new loan takes the place of an old loan that was ahead of the Notice of Federal Tax Lien, to protect the bank’s claim on the property. It can also be used in a factoring agreement where a third party can apply for a certificate of subordination of the Notice of Federal Tax Lien to collect a business’ accounts receivable, with a time limit for the subordination certificate.
Protecting Your Assets and Credit from a Tax Lien
While understanding and addressing tax liens is crucial, protecting your assets and credit from a tax lien is also paramount. Here are some strategies to consider:
- Understand the impact of tax liens on credit scores.
- Implement asset protection strategies to shield your assets from a tax lien.
- Consult with a financial advisor or tax professional for personalized advice on protecting your assets and credit.
By following these strategies, you can minimize the debilitating effects of a tax lien on your financial well-being.
The key is to be proactive. A ‘Notice of Federal Tax Lien’ or ‘Notice of State Tax Lien’ can severely impact individuals and businesses by making it challenging to sell property or obtain loans.
Impact on Credit Score
A tax lien can leave a significant dent in your credit score. While the IRS does not directly notify credit bureaus of a federal tax lien, it becomes a matter of public record, which means credit bureaus may include it in credit reports, affecting credit scores. Once a ‘Notice of a Tax Lien’ is issued, credit bureaus are more likely to discover and report it, complicating the process of obtaining a credit report.
However, there is a silver lining. Taxpayers with a debt owed of $25,000 or less can potentially have their tax lien withdrawn from the public record after establishing a Direct Debit installment agreement to fully pay the debt within 60 months or before the Collection Statute expires. And since 2018, credit bureaus have stopped listing tax liens on credit reports as a derogatory remark.
Asset Protection Strategies
Protecting your assets from a tax lien often requires strategic planning. Various strategies can be employed, such as establishing trusts, transferring assets to family members, or investing in legally protected assets. For instance, if a tax lien affects a bank account, it can limit the individual’s ability to receive additional credit or open new credit cards.
Establishing an asset protection trust in certain states can provide a safeguard against creditors by not subjecting the trust’s assets to the same claims against the individual’s personal assets. Transferring assets to a family member can also protect them from a tax lien, but this must be executed with care to avoid scrutiny or allegations of fraud.
Investing in assets legally protected from tax liens, such as some retirement accounts and life insurance policies, can help shield a portion of an individual’s wealth from the IRS.
Legal Support with Tax Liens in Orange County
Legal hurdles are always easier to overcome with professional guidance. This holds true for tax liens as well. Premier tax attorneys in Newport Beach, like us at Ronald Arthur Stearns Sr. PLLC, are available to provide professional guidance on all IRS-related tax issues, including those involving tax liens.
Our personalized approach involves speaking directly to your concerns.
Consultation with Our Team
Understanding the unique nuances of each client’s situation enables us to provide customized solutions. We offer consultations for taxpayers to address their tax lien concerns. With our experienced California tax attorneys, facing tax issues, including liens, become a smoother process.
We encourage taxpayers to utilize these consultations to speak about their unique tax lien situations. Our focus is on developing practical solutions to effectively manage and resolve tax lien complications.
Representation and Advocacy
Aggressive and independent representation by a seasoned California tax attorney can protect an individual’s assets, business, and reputation against serious tax matters such as liens. At Ronald Arthur Stearns Sr. PLLC, we utilize strategies and tactics based on formidable skills and extensive experience to achieve the best outcome for clients facing tax liens.
Our team, comprised of former IRS Officers and Auditors, has insider knowledge of how the IRS operates, enabling us to offer effective representation and advocacy.
Preemptive Measures to Avoid Future Tax Liens
The best defense is a good offense. Taking preemptive measures can help you avoid future tax liens. This involves timely tax payments and filings, adjusting tax withholdings, and keeping detailed records.
Financially, it’s akin to maintaining a healthy diet and regular exercise regimen to stave off future health issues.
Keeping Up with Tax Obligations
Staying current with tax payments is the most effective method to prevent tax liens from being placed on property or assets. To prevent a state tax lien in California, taxpayers should file tax returns timely and maintain current address records with the tax authority.
Timely tax filings and payments minimize the risk of penalties, interest, and enforcement actions like tax liens. Even if you cannot pay the full tax amount by the due date, timely filing of tax returns helps avoid late filing penalties. Implementing strong organizational strategies for financial and tax documents can help ensure compliance with tax obligations and avoid liens. Using electronic filing and payment systems can streamline the process and reduce the risk of delayed filings and payments.
Role of Tax Professionals
Tax professionals can guide taxpayers on how to avoid pitfalls that may lead to tax liens, which may include:
- Timely tax payments
- Timely filing
- Maintaining detailed records
- Managing correspondence with the IRS or state tax agencies
These steps can be crucial for dispute resolution in case of erroneous liens.
They can also help taxpayers develop strategies to reduce tax liabilities, including tax levies, and avoid large tax bills that could lead to liens.
How Ronald Arthur Stearns Sr. PLLC Can Help You
At Ronald Arthur Stearns Sr. PLLC, we provide legal representation to individuals and businesses in Texas facing IRS tax collections. Our services include:
- Collection defense
- Collection alternatives
- Audit defense and appeals
- IRS tax law consultation
With over 26 years of litigation experience, Ronald Arthur Stearns Sr. is committed to handling each case personally as a dedicated taxpayer’s advocate.
We can assist with resolving issues such as unpaid income taxes, unpaid payroll taxes, unfiled tax returns, and tax returns being audited. We are capable of negotiating with the IRS to potentially settle tax obligations for less than the amount owed, under the right circumstances. Our services include negotiating offers in compromise, partial pay installment agreements, obtaining currently not collectible status, and exploring statute of limitations. We also handle audit reconsideration, automated substitute for return (ASFR) reconsideration, and penalty abatement.
We emphasize the importance of professional guidance for small business owners in tax compliance and offer audits and education on business tax compliance assurance. Our clients have praised us for our honesty, professionalism, and reasonable pricing, as well as our commitment to guiding taxpayers through complex tax issues.
Remember, the journey of a thousand miles begins with a single step. Taking the first step, like reaching out to a professional for a consultation, could set you on the path to resolving your tax lien issues. At Ronald Arthur Stearns Sr. PLLC, we’re committed to walking this journey with you, providing the guidance, representation, and advocacy you need. Call us today for protection that works for you at 949-676-7193.
Frequently Asked Questions
How do I get around a tax lien?
The best way to get around a federal tax lien is by paying your tax debt in full. The IRS will release the lien within 30 days after full payment.
How do tax liens work in California?
In California, a tax lien is a public notice issued by the CDTFA, encumbering your property until the tax debt is fully paid. It prevents selling, refinancing, or transferring the property through escrow.
Can a tax lien affect my ability to sell my property?
Yes, a tax lien can significantly affect your ability to sell your property. Since it is a legal claim against your assets, a tax lien attaches to your property, making it difficult to sell or refinance without first clearing the lien. Potential buyers are likely to be deterred by a lien, as it indicates that the government has a legal right to your property due to unpaid taxes. To sell a property with a lien, the debt usually must be paid off with the proceeds of the sale, or an agreement must be reached with the tax authority to remove or subordinate the lien.
What is a tax lien?
A tax lien is a legal claim by the government against a taxpayer’s property for failing to pay state taxes owed, attached to all the taxpayer’s assets, including real estate, equipment, and intellectual property.
What can I do if I’m unable to pay my tax debt in full?
If you’re unable to pay your tax debt in full, there are several options available to you. The IRS and state tax agencies offer payment plans, such as installment agreements, which allow you to pay your debt over time. Another option might be an offer in compromise, which, if accepted, allows you to settle your tax debt for less than the full amount you owe. It’s important to act promptly and consult with a tax professional to explore the best option for your specific situation.