Tax Liens

If you owe a balance to a taxing authority, whether it is the IRS, the Colorado Department of Revenue, or any other state, county or city government, you may have a tax lien filed against you or your business.

A tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest and can attach to nearly all your property, including property you acquired after the tax lien was filed.

When the IRS files a tax lien, it prepares what is called a “Notice of Federal Tax Lien” or NFTL. A NFTL is a public record that can have a powerful impact on your finances and ability to operate your business or complete other financial transactions.

How Does a Tax Lien Affect Me?

  • Assets: A lien attaches to all of your assets (real estate, income and other revenues, investment accounts, vehicles and more), and to future assets acquired during the duration of the lien. This means a lien attaches to wages! This is what allows a taxing authority to garnish your paychecks!
  • Credit: Once the government files a tax lien, it may be reported to the credit agencies and thus may lower your credit score and limit your ability to get credit.
  • Business: The lien attaches to all business property and to all rights to business property, including accounts receivable.
  • Bankruptcy: If you file for bankruptcy, this may not necessarily resolve your tax lien problem. Particularly if you owe the IRS, your federal tax debt and the NFTL may continue after the bankruptcy.

How Can I Get Rid of a Tax Lien?

The simplest route to get rid of a tax lien is paying the tax debt in full. The IRS will “release” your NTFL within 30 days after you have paid your federal tax debt.

The Colorado Department of Revenue will not always release the lien automatically after you pay the debt. Often, you have to obtain confirmation from the state that debt is satisfied, and then you are responsible to file it where it needs to be filed (for example, your county Clerk & Recorder office or state court) in order to remove the lien from public records.

I Can’t Pay the Tax Debt But I Need Help With the Tax Lien Right Away

Sometimes, when conditions are in the best interest of both you and the government, other options for reducing the impact of a lien exist.

  • Subordination: “Subordination” does not remove the lien, but allows other creditors to move ahead of the taxing authority who holds the lien, which may make it easier to get a loan or mortgage.
  • Discharge: A “discharge” removes a tax lien from specific property (for example, a home that you would like to sell). There are several laws and regulatory provisions that may determine eligibility, depending on who holds the tax lien.
  • Withdrawal: A “withdrawal” with the IRS removes the NFTL from public record. This removal is also reported to the credit agencies, and the record does not show up on your credit history anymore! The IRS has certain programs that may qualify you for a tax lien withdrawal. You can also request a withdrawal after you have successfully completed the terms of an Offer in Compromise settlement.
  • Appeal or Contest the Lien: If the taxing authority files an improper lien against you, perhaps due to a mistaken name or title issue, or because you do not actually owe the debt that is allegedly due, you can file an appeal or protest of the lien filing.

Tax Lien vs. Tax Levy

They are not the same thing – a lien is not a levy!

A lien secures the government’s interest in your property when you don’t pay your tax debt. A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, a taxing authority has the legal ability to levy, seize and sell any type of real or personal property that you own or have an interest in.

At the Law Offices of Daniel T. Goodwin, our tax resolution team has handled a wide range of cases and issues involving tax liens. Do not hesitate to contact us if you have a question about a tax lien or need help resolving your lien problem.