How much did you pay in taxes last year, or more precisely, did you pay all of your incurred taxes last year? If you owe the IRS, you may have to face a tax lien. In the simplest of terms, a tax lien is a document that alerts the general public about your unpaid debts. In case you sell the property, the amount you gain will be used for paying of all your debt, and you will only be given the remaining money.
Tax liens can be associated with both state and federal taxes. There is a super lien as well, which indicates you have not paid your homeowners association dues.
So are you the only one with unpaid taxes? Actually, no. the last time the IRS filed tax liens it was for over 708,000 people.
Should you be worried about tax liens?
We talked to an accountant, and he told us that the severity of tax liens can be determined by considering the amount of debt you owe to the IRS. When it comes to debt, owing to a government entity like a municipality or state is more serious than not having paid your taxes. The accountant advised us that you should pay these debts first and then worry about your taxes.
Compared to federal tax liens, state tax liens are more serious and can even result in you losing your home altogether. With a federal tax lien, this is not the case, because you have sufficient time to rectify the situation. However, your score will fall and reduce your borrowing power.
How do you deal with tax liens?
A contact number is given on lien notifications. Use this number to get it touch with the representatives and discuss the situation with them. Depending on your circumstances, things may actually work out in your favor or at least better than what you expected. The IRS does offer some solutions like the Offer in Compromise. If you are granted this, your debt will be satisfied with a smaller amount.
An industry expert told us that liens should be handled in all ways except pretending ignorance. If you just ignore the notice, you are going to make things worse. He advised that a better approach was to convince the IRS to allow you an installment plan and pay for the debt at your earliest.