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Facing a federal tax lien--do you know what to do?

The average resident of California has little to no understanding of what a federal tax lien is or how it works. Simply put, it is what could happen when you fail to pay your federal income taxes. It is a claim against your property that will not arrive until you first receive a Notice and Demand for Payment which indicates how much you owe.

The federal government having an interest in not only financial assets but personal property and real estate as well is not a place where most individuals want to find themselves. Since it can also attach to business property and make it difficult to secure credit, most want to know what steps need to be taken to address it.

There are several ways in which to potentially minimize the impact of the lien. The first is to seek a withdrawal. While under this approach you are still liable for the tax debt owed, it removes the public Notice of Federal Tax Lien. Next is subordination. This could be beneficial to tax payers as it is easier to get a mortgage or loan since other creditors move ahead of the IRS. Last, the lien may be removed from certain property via a discharge.

To get rid of the lien completely, you must pay the tax debt you owe. Usually 30 days following that payment the lien will be released.

Attempting to navigate this process on your own can be scary and difficult. In an effort to attain the best possible outcome many find it beneficial to work with a tax lawyer.

Source: Internal Revenue Service, “Understanding a Federal Tax Lien,” Accessed Oct. 8, 2014

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Law Offices of Robert T. Leonard, APC

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