August 6, 2015

dtlf1A tax lien, simply put, is the legal claim of the U.S. government against some or all of your assets due to your failure to pay a tax debt on time. A federal tax lien can be assessed for unpaid taxes of any type, including self-employment, income, estate, or gift taxes.

The general rule is that a federal tax lien attaches to all of your properties. In order to get the tax lien released, you must first be able to pay your past due tax liabilities. In most scenarios, the IRS will only file a federal tax lien if you owe at least $5,000 in back taxes.

If you have an IRS tax lien on your home, it does not necessarily mean that the government has taken over your property or that the IRS can force you to sell your home. What it does mean is that the IRS has a right to take any proceeds from the sale of your home to satisfy your unpaid taxes.

While having an IRS tax lien on your home is never a good thing, taxpayers at least still have several options to resolve their tax issues. If your property is sold, then your government debt will be paid and you can receive the remainder of the money. Of course, a federal tax lien on your home may make it more difficult to sell your home and refinance the mortgage. Your credit score will also likely take a substantial hit.

If your home has sufficient equity to satisfy your unpaid taxes, then you may discharge the tax lien by selling your home and using the sales proceeds at the time of closing to pay the IRS. Take note that you will need to provide the IRS with full documentation about the sale. For a home to be transferred from a seller to a buyer, it must be free of any liens so that the buyer can obtain a clear and warranted title on the home.

If, on the other hand, there is not enough equity in your home, then you may opt to request for a release of the lien. In some instances, the IRS might accept a partial payment to discharge the lien so that the sale can push through, or even look for any other assets that may be used to pay off your taxes.

Take note that asking and selling prices on your home are typically based on its current market value—and do not account for the presence of the tax lien. The amount of the lien is instead simply considered as part of your expenses when closing the sale. One hopes there is enough equity in your home to cover the entire amount of the lien.



Categories: Blog, IRS, Tax Penalties, Taxpayers' Rights