Let me start answering that question by asking a question: Do you have an unpaid federal tax liability with the Internal Revenue Service (IRS)? And have you received previous notices from the IRS in an attempt to collect that unpaid tax? If so, then in all likelihood, the property lien is related to this unpaid tax liability. A property lien is one of the methods available to the IRS for them to escalate the collection of tax they are owed, and it can be a relatively serious financial matter for you.
When the IRS files a lien against your property, it gives them the right to attempt to seize and sell the property. The proceeds from the property are then applied against your unpaid tax liability.
Having an IRS property lien against you is significant as it does not apply to just a single piece of property or to just one type of property but rather to virtually all of your property. This property includes your personal residence, vacation homes, all of your vehicles, your furnishings, family heirlooms—anything you have of value that could be sold by the IRS at a profit. It also includes any assets you acquire after the property lien has been filed. And the lien is not considered a short-term matter—it lasts for at least ten years—so the lien will essentially stick with you until the tax liability is paid in full or you have otherwise negotiated a settlement or payment plan with the IRS.
Depending on your circumstances, there are a couple types of property that the IRS will generally not seize as part of a property tax lien. The first is your personal residence. Although your personal residence is technically included in an IRS property tax lien, the IRS will usually choose not to seize your personal residence unless they see it as a last resort when you have gone to extensive measures to avoid paying the tax you owe or otherwise working with the IRS to resolve the debt.
The second is property that has no value. An example of property without value may likewise be your personal residence if you have a mortgage on that property. A mortgage is a lien on the property from the creditor that loaned you the money to purchase the property. When an asset is sold, the proceeds from the sale are generally applied to pay any liens on the property in the chronological order the liens were attached to the property. This means that the oldest lien is paid first.
For example, if you have a home worth $100,000 with an $80,000 mortgage, then when the property is sold, there will be at most $20,000 in value left that can be applied to pay down the tax lien. However, when the IRS seizes property to satisfy a lien, it generally sells that property in an auction at a discount. Therefore, the IRS can calculate beforehand that a property with a $100,000 value and an $80,000 mortgage is likely not worth, as once the property is discounted it will not generate any proceeds from the sale the IRS can use.
Given the power that a tax lien provides to the IRS and how long a tax lien stay in effect, if you have a tax lien filed against your property, it is generally a good idea to hire a lawyer and work with the IRS. A lawyer can help you negotiate a settlement, an offer in compromise, or a payment plan to resolve the unpaid tax.
How can I hire an attorney to help me with my tax situation?
If you need to hire an attorney, you can start by completing the short form below. By completing the form, it will allow a tax attorney to review your situation free of charge to provide an opinion as to what the best steps are for you to take. This review is 100% confidential and does not obligate you to anything further. Therefore, please take this opportunity to have a trained attorney advise you on your tax liability issues today.