Until recently, you may never have heard of a Federal Tax Lien. But once you began receiving harassing phone calls and letters from the Internal Revenue Service trying to collect your Federal Tax Debt, you probably hear about Federal Tax Liens much more than you care to. On a positive note, you are not alone. In this weakened economy, more and more Bostonians are having trouble keeping up with their Federal Tax Debt. On a negative note, though, this Federal Tax Lien can make your life very difficult. Consider getting help from a Boston area attorney licensed in Tax Law right away.
You might think you do not need help from an attorney with your Federal Tax Lien. You may have fought off aggressive creditors before or have experience with a prior lawsuit. No matter what financial or legal difficulties you have survived thus far, know that fighting the Internal Revenue Service and a Federal Tax Lien are unlike anything you have ever done before. You are not battling a bank or someone in a courtroom. When you fight the Internal Revenue Service, you are fighting the United States Federal Government. This is serious, perhaps more serious than you may realize.
How Does a Federal Tax Lien Work?
In layman’s terms, a Federal Tax Lien gives the Internal Revenue Service the legal right to receive money from the sale of your home before you do. And the Lien does not expire, so it stays in effect until you sell your home, whether that happens in one year or forty years. As soon as you sell your home, the Internal Revenue Service will step in and collect the full amount of your Federal Tax Lien from your home sale proceeds before you ever receive a dime.
Once the Internal Revenue Service levies a Federal Tax Lien against your property, you will receive written confirmation of:
- The property address against which the Federal Tax Lien is filed;
- The Federal Tax Lien amount;
- The county in which the lien is recorded; and
- Contact information for the Internal Revenue Service.
The Internal Revenue Service uses Federal Tax Liens because they are incredibly effective. They know that if you cannot pay your Federal Tax Debt, more often than not you cannot pay other debts, too. Perhaps you need to adjust your standard of living by moving into a more affordable home. You may plan to sell your current home, using some of the profit to make multiple payments on several debts as well as making a down payment on a more affordable home. Your Federal Tax Lien will prohibit you from doing so; that home sale profit you are counting on to pay down debts and make a down payment on a more affordable home will now go to Internal Revenue Service. You have very little power on your own to stop them.
You may not yet have realized other ways that your Federal Tax Lien can change your financial plans:
- Paying-Off Your Federal Tax Debt: Most Bostonians would be shocked to learn that your Federal Tax Lien can actually make it harder for you to pay-off your Federal Tax Debt. In the best situation, you would find a higher paying job that would allow you to quickly pay-off your Federal Tax Debt. But if that dream job is a distance away, you may need to sell your current home and relocate, using some of your home sale profits as a down payment on a new home near this dream job. Everything changes with your Federal Tax Lien. Your home sale profits go to the Internal Revenue Service until your Federal Tax Lien is satisfied. You may not have enough money leftover for a down payment on that home near your dream job. In this scenario, you may be unable to take the very job that would allow you to pay-off your Federal Tax Lien, all because of your Federal Tax Lien.
- Your Credit Score: The Federal Tax Lien could damage your credit score with Equifax, Experian, and TransUnion, the major credit-reporting agencies. Unfortunately this could cost you more in higher interest rates on future credit, as well as prevent you from getting future credit at all or even cause you to lose out on insurance or employment opportunities.
- Retirement or Other Large Financial Decisions: If you have planned your whole life to sell your home at some point and use your equity to fund retirement or college, your plan may need revisiting. Your Federal Tax Lien keeps you from using your equity the way you desire, since the Internal Revenue Service will be first in line to use it against your Federal Tax Lien.
Are you beginning to see that Federal Tax Liens can damage your family’s future?
But it can get even worse. Should you decide you have had enough hassles with the Internal Revenue Service and you just want to sell your home to get rid of the Federal Tax Lien, you still may not be rid of the Internal Revenue Service. Particularly in areas of Boston where housing prices artificially low, your home sale profit may not cover what you owe the Internal Revenue Service. Should that happen, the Internal Revenue Service will still be after you, and you will be without a home or a down payment to get another one.
Even worse than that, after the Internal Revenue service takes what they can as payment against your Lien, you might not have enough left to pay-off your mortgage. So you could be without a home, unable to make a down payment on another home, possibly still in debt to the Internal Revenue Service AND still owing on your former home that someone else now owns.
So How Can I Hope to Survive This?
Before doing anything else, contact a Boston area attorney licensed in Tax Law. Stop thinking that you can fight the Internal Revenue Service and win on your own. Were you able to resolve the problem before they started threatening you with a Federal Tax Lien? Remember, the Internal Revenue Service is not your average adversary. They have the full authority and resources of the United States Federal Government behind them, and they are good at getting money out of people who really do not want to pay.
Here is one last point to consider. Frequently the Internal Revenue Service will accept a small percentage of what you owe as payment in full of your Federal Tax Debt. You have probably yet to hear them offer you that option. But reaching a deal on a lower payment takes prior experience, expertise, and knowledge that most people simply do not have. In all likelihood, all of your conversations and correspondence with the Internal Revenue Service thus far probably have not improved your situation at all. Stop wasting your time and risking your family’s security. Make a smart decision. Find an advocate in the Boston area who can help you with your tax problems today.