When you purchase property, is it really yours? The answer, of course, is yes. However, there are qualifiers. If you borrow money to buy a house or car and use the property as collateral, your lender has a stake in the game in the form of a lien. However, even if you hold clear title to the property, it is still possible find yourself confronting a lien from state or federal tax collectors.
Such a situation needs swift attention. Fortunately, it should not come from out of the blue. The IRS and state collectors have a right to file claims against your property when you fail to cover an outstanding tax debt. But rules of engagement lay out specific steps officials must follow before a lien is imposed. Before it gets to that stage, there is time to consult an attorney, assess the legitimacy of the claim and formulate an appropriate response.
Know your rights
To deal with a lien, it is important to understand what it is. A lien is not a levy. The lien comes before the levy. Receiving a notice of a lien represents the government's effort to secure its interest in recovering what it is owed in the event the property is forfeited through a levy later.
What a lien does is declare to the public that a tax claim exists against you. It attaches to all property you might own, business as well as personal. So, receiving a lien notice could:
- Restrict your ability to expand your credit
- Disrupt your revenue stream by attaching business property, including accounts receivable
- Leave you facing the tax obligation even if you file for bankruptcy and complete that process
It is possible to see a Notice of Federal Tax Lien removed through a successful appeal. Alternatively, there may be ways to have the notice withdrawn from public record while the tax debt is being resolved. It all depends on the specific circumstances of your case, which is why contacting experienced counsel is so important.