Failing to file and pay taxes on time is one of the most common reasons the IRS places liens on taxpayers’ property.
The longer you wait and ignore the notices you receive from the IRS, the higher the chances the agency will initiate the collection process and place a lien on your property. Most people in this situation ask themselves how to know if the IRS has a lien on their property.
What are the signs and verification methods? Finding the answer doesn’t take much more than looking at the last notice you received from the IRS because it should contain the steps you can take to avoid having your assets placed under a lien by the IRS.
Let’s look at signs and verification methods that can help you determine if the IRS has a lien on your property.
Table of Contents
Federal tax debts don’t expire if you don’t file a return. The IRS has ten years to collect tax debts from taxpayers who file returns on time but fail to pay the entire amount they owe.
Section 6321 of the IRC states that:
‘Any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.‘
Hence, all individual and business taxpayers can be subject to federal tax liens if their tax debt exceeds the tax lien threshold.
You’ll receive Notice CP14 when the agency determines you have unpaid taxes. The document outlines the fees and penalties you must pay besides the due balance and instructs you on settling your tax liabilities. However, it doesn’t mention a tax lien.
The IRS will send you Notice CP501 if you ignore the previous notice that states the agency can place a lien on your property if you don’t pay the tax debt. This notice is followed by Notice CP503, which requests the payment of the outstanding liability.
Taxpayers who don’t respond to either of these notices by the deadline will get Notice 1450 that the IRS has filed the Notice of Federal Lien on public records.
A federal lien gives the IRS a claim on your property, so if a lien was placed on your home, you must first satisfy the lien before you can refinance or sell it.
A federal lien indicates that the federal government has a stake in all taxpayers’ property, including real estate, financial assets, and personal property. A lien only allows the IRS to claim your property before other creditors. But it doesn’t indicate an immediate seizure of your assets.
Hence, the IRS won’t take assets before filing the Notice of Federal Lien and alerting creditors and everyone else who might have a stake in your property that you owe taxes to the federal government.
Other common tax lien signs are:
A tax lien can prevent you from getting a job, as employers often check credit scores when screening candidates.
The IRS’ federal lien threshold is $10,000, and they don’t use this collection method for debts below this amount. However, it’s important to note that the IRS could put a lien on your property if the base debt is below $10,000, but fees and penalties push you over the threshold.
Receiving phone calls or mail from suspicious tax debt relief companies referencing your tax debt can indicate that the IRS has placed a lien on your property and that the document entered the public record.
Keeping track of the correspondence you receive from the IRS is the easiest way to check if your property is under a lien. A lien usually enters on public record ten days after you receive the final notice from the IRS and fail to respond to it.
Here’s how you can check if the IRS filed a Notice of Federal Lien with a local county Recorder of Deeds or Secretary of State office.
Speaking directly to the IRS is the best way to address a lien and take steps to prevent the government from claiming a stake in your property.
The IRS Centralized Lien Operation handles the federal lien process. You can contact this unit by calling (800) 913-6050 to find out if the IRS has a lien on your property.
In addition, you can arrange a meeting with an agent who can help you find the best way to repay the debt and lift the lien off your property.
The IRS files the Notice of Federal Lien document with the Secretary of State or a county tax office. That’s why it may take a while before the document appears on their records.
The Secretary of State’s website features the full list of tax lien filings as soon as the document is filed, so you can quickly determine if the lien entered public records.
Depending on the state, you’ll have to use UCC or tax lien search option and verify your identity when checking if the IRS has a lien on your property. Alternatively, you can visit the local county tax office to get more information about a federal lien placed on your property.
The RiskReview™ Liens and Judgments Report feature of the LexisNexis legal database gives you access to all federal liens on file. You can use this tool to gather details about the lien the IRS placed on your property and use that information to get rid of it.
Even a minor tax liability can balloon over the federal lien threshold if you neglect your tax obligations long enough.
Paying the entire amount you owe to the IRS is the easiest and fastest way to lift a lien off your property because the IRS will release the lien within thirty days after you make the payment.
However, the IRS doesn’t file liens for debts under $10,000, so most taxpayers can’t afford to settle their debt with a single payment.
Contacting the IRS Centralized Lien Unit will enable you to work out the details of an installment agreement, Partial Payment Agreement or join the Fresh Start initiative.
You can request the withdrawal of the federal tax lien after making three payments within the Direct Debit Installment Plan. However, remember that you cannot submit a withdrawal request if you owe more than $25,000.
The IRS offers several other ways to get rid of tax liens to taxpayers who cannot settle their entire tax debt in one payment.
These methods of lifting liens from their property are only available to taxpayers who meet the specific criteria. Depending on your eligibility, you can explore these methods of lifting a lien on your property:
Federal tax liens are included in credit reports for seven years, which is why they can continue hurting your credit score long after you pay the taxes you owe.
Obtaining the lien release report that confirms you cleared the debt and submitting it to credit bureaus will ensure a lien isn’t listed on your credit report.
You can appeal a tax lien up to thirty days after it enters public records and request its removal or withdrawal.
What Happens If I Ignore a Tax Lien?The IRS will issue a levy that allows it to garnish your wages, take funds from your bank account, or seize your property if you ignore a tax lien and refuse to pay the tax debt.
Can the IRS Refile the Notice of Federal Tax Lien?The IRS has ten years to collect tax debts. Still, under certain conditions, they can refile a Federal Tax Lien to prolong its effectiveness for another ten years and retain their claim on a particular property.
Tax liens are intimidating and often humiliating because they’re on public records. Although avoiding them isn’t always possible, the IRS offers a variety of ways to reduce their impact on your financial health.
Checking if the IRS has a lien on your property doesn’t take more than one phone call to the Centralized Lien Unit or a visit to the Secretary of State website. You shouldn’t deal with a tax lien on your if you find out that the IRS has a legal interest in your property
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.