What Happens When an IRS Tax Lien is Placed on Your Property – and What Can You Do?

Share on facebook
Share on google
Share on twitter
Share on linkedin

Being hit with an IRS Tax Lien is an anxiety- and stress-ridden event, but understanding the action can help you navigate the process.

The process begins when the IRS files a Notice of Federal Tax Lien, and this notice goes on your credit. The result is that the lien essentially diverts any income coming to your small business and its property to the IRS. And it does so, until you satisfy the debt.

What to Do When You Receive Notification

First and foremost, don’t ignore an IRS tax lien notice. Contact the IRS immediately to get information about your situation and ensure there hasn’t been a mistake.

Bankruptcy is typically not an option for removing a tax lien on your small business. As long as the debt remains unpaid, the agency may hold the lien– even after bankruptcy. Therefore, the easiest way to remove the lien is to pay the tax, but if this isn’t possible, here are a few methods to consider:

Withdrawal:

This method removes the lien and prevents the IRS from competing with other creditors for your company’s property. Those who have an installment agreement with the IRS may be eligible, but a withdrawal doesn’t wipe away your debt, and you will still be responsible for the taxes owed.

Subordination:

Since the tax lien is placed on your credit report, you’ll have difficulty applying for new lines of credit. Subordination doesn’t remove the lien from your history, but it allows other creditors to cut in front of the IRS. In other words, you can still be approved for a credit card, mortgage or loan with a tax lien on your report. 

Discharge of property:

This method removes the lien from your property, and there are several requirements that you must meet in order to be approved for a discharge of property. You must request the discharge and provide documentation on the purchase price, the purchaser, your existing debt and the value of the property.

Wiping out tax debt can be complicated, especially if you’ve never been hit with a tax lien before. By understanding the process and knowing your options, you can ease the stress and begin to work toward satisfying your debt. Call us NOW if you if an IRS Tax Lien has been placed against you or your business. We can be reached at 720-398-6088.