In our last post, we took a look at tax audits, and how people should deal with this unfortunate event in their lives. You have to approach tax audits in a calm, but efficient, manner in order to see them through successfully. Today, we're going to talk about another bit of legal action in the tax world: the tax lien.
You've probably heard the phrase "tax lien" before but you may not know exactly what it means. A tax lien is a legal claim on an individual and all of his or her property or assets when they fail to pay their tax debt. If you don't address your tax debt in a timely manner, eventually the IRS stakes their claim to the debt, filing a tax lien which then alerts creditors and other organization that you are in financial trouble.
This has obvious ramifications. First of all, it is highly unlikely that you will be able to secure other lines of credit while the lien is active. Secondly, when you do pay your debt, there will be numerous financial penalties and fines, meaning that you will likely pay more than you should have in the first place. The lien will also affect your financial standing.
Ultimately, you can adequately address a line just like how you can adequately address an audit. You can free yourself from the lien but filing for a discharge of property, which allows you to see assets without the specter of the lien hanging over the transaction. You could also move to address other debts first before dealing with a lien. Or you could appeal the lien and try to have it withdrawn.
Source: FindLaw, "What Is a Tax Lien?," Accessed Oct. 2, 2015