When individuals cannot promptly pay the back taxes they owe the IRS, this government agency can notify them of a tax lien, which is the government’s right to seize property. A tax lien can seriously affect a person’s credit rating, and removing it becomes a priority.
Here are several methods to remove a tax lien:
- Settle the back taxes. This will definitely remove the lien, but it can prove difficult to raise the lump sum needed. Go through your entire assets and see which ones can be used to pay your debt.
- Wait until the lien has expired. There is a statute of limitations of ten years for tax liens starting on the date of assessment, after which liens are unenforceable. The downside for this strategy is the period of waiting is considerable, and the IRS may simply extend it.
- Hire a tax professional. A professional can efficiency file your requests, talk to the appropriate IRS agents, bypass the bureaucratic hurdles and guide you in removing the tax lien. He can also negotiate for a lower tax debt after showing your inability to pay the full amount. Look online for tax professionals in your vicinity, research on their backgrounds for signs of competence then interview several and ask about their experience and fees.
- Offer in compromise. This method requests for a reduction of the tax debt given proof that the taxpayer is financially unable to pay the original amount without affecting his lifestyle considerably. The IRS rarely grants compromises and will demand hefty requirements to consider it; a good tax professional can help you assemble the evidence and argue successfully for a debt reduction. Some of the evidence required are rental fees and other monthly expenses, bank statements and income statements.
- Negotiate a payment plan. By paying the tax debt in affordable installments over a long period of time, a taxpayer can prevent the IRS from imposing a lien. A payment plan also requires negotiation with the IRS with regards to the installment amount and length of time.
- Post a bond. Posting a bond and issuing a guarantee of payment of all debt, fees and other expenses will release the lien; however, being able to afford a bond also means being able to afford paying the tax debt.
- Request for an appeal. While winning a hearing will cause the IRS to remove the lien, their filing of it will still show in your credit report.
- Apply for a Certificate of Release. The IRS may erroneously file a lien against you despite the fact that you paid your back taxes. To address this, request the agency for a Certificate of Release which states that the lien was given in error. You must the photocopy this certificate and pass them to credit bureaus in order to reduce the harm done to your credit rating.
Bankruptcy is one extreme way to remove a lien, but this measure will have to be effective with both federal and state laws. Studying both levels of regulation will reveal if this brutal method will be effective against tax liens.