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The Ultimate Guide to Resolving IRS Tax Liens and Unpaid Taxes

Paying taxes is part of life, but sometimes, it needs to be remembered. While many people understand the importance of paying their tax bill, life can sometimes get in the way, leading to delinquent taxes. When property tax payments are missed, local governments can place tax liens on specific property. This results in a legal document, usually from unpaid federal tax obligations.

Regarding tax debt matters, receiving a notice about a federal tax lien from the Internal Revenue Service can be more intimidating. If you’re unfamiliar with a tax lien, this article is for you. Get to know what an IRS tax lien is, how it affects your finances, and how to resolve an IRS tax lien.

What is an IRS Tax Lien?

When an individual or business misses their tax bill, the IRS can claim their property, like a car, house, or other establishment. A tax lien is a formal assertion by the IRS, indicating their legal right over assets due to outstanding federal tax obligations. This legal claim arises when the tax bill is settled after the due date.

If local governments detect that property tax payments have yet to be made, they, too, can put tax liens on the property in question. A lien doesn’t mean the immediate loss of property. Instead, it signifies the government’s priority right over the asset. The property becomes a form of security until the taxpayer clears their dues.

How Can You Lose Your Property With Unpaid Property Taxes?

If the homeowner fails to settle the unpaid amount, they get a redemption period to repay the taxes, interest, and additional penalties to the certificate holder. This is the last chance for the property owner to clear their dues and lift the lien. The original property owner has a legal claim before the property goes to tax lien sale. If the taxpayer does not pay the amount before the expiration date, the tax lien certificate holder can initiate foreclosure and potentially gain ownership of the property.

To prevent getting into a situation where an IRS tax lien is placed on one’s assets, it’s vital to stay updated with payment requirements and not let taxes owed accumulate. Remember, an IRS tax lien is a public record, which means credit bureau agencies can access this information.

What Happens to the Property If Taxes Remain Unpaid?

A tax collector might resort to a public property auction if unsettled taxes persist. Many novice investors or those into tax lien investing are interested in investing passively by buying the rights to the property and await a generous return. They hope to be the highest bidder.

During the auction, the private sector can call dibs and assume ownership by paying the assessed value and agreed interest rate. After spending a significant amount, the winning bidder can acquire and extract interest from the tax lien certificate.

How Tax Liens Affect Your Finances

Since tax liens become public documents, they can hurt a person’s or company’s financial situation. Here’s how these liens can cause money problems:


While tax liens were removed from credit reports by the major credit bureaus as of April 2018, they remain in public records. Lenders or entities performing deep financial checks can still discover them. Even if not on a credit report, a tax lien can affect one’s ability to secure loans, mortgages, or other forms of credit.

Property Transactions

A tax lien makes selling or refinancing properties, especially real or personal property, more challenging. Property owners, potential buyers, or lenders may hesitate because of the local government or the Internal Revenue Service’s claim on the property. If a property owner manages to sell the property, the proceeds might be directed to satisfy the tax lien before you receive any money.

Asset Seizure and Sales

If not addressed, a tax lien can evolve into a tax levy. The local governments could then seize assets, such as real estate, cars, or bank accounts, to cover the unpaid tax. The IRS or tax collector can also claim future assets acquired during the period the lien is in effect. This can be complicated if there are other liens or claims from other creditors.

Business Repercussions

For businesses, a tax lien can tarnish their reputation. Attracting private investors, institutional investors, or hedge funds takes time. A lien can also impact a business’s ability to secure loans or navigate local government issues. Business assets, including accounts receivable or real property, can become targets to satisfy the lien.

Loss of Control Over Refunds

If there’s a tax refund due while a tax lien is in place, the IRS can seize that refund and apply it toward the debt.

Interest and Penalties

The longer the debt or delinquent property taxes remain unpaid, the more one owes interest and penalties. This can make the debt balloon over time. Instead of using the money to invest or purchase tax lien certificates, it is allocated to pay for interest.

With all these implications, it’s crucial to address any tax liability promptly. Engaging in tax lien investing or understanding how tax lien investing works can be a route for some experienced investors. However, please always approach cautiously and ensure diligence, especially in acquiring the tax lien certificate.

Steps to Resolve an IRS Tax Lien

Fixing an IRS tax lien is important to get your finances back on track and sleep better at night. It might seem scary, but there’s a clear path you can follow to sort things out:

Review Your Tax Records

Meticulously maintaining tax records is the first line of defense when resolving an IRS tax lien. This ensures financial transparency and accuracy. These records serve as a testament to your income and expenditures and shed light on any potential discrepancies or overlooked tax deductions. Such oversight can result in overpayments or inadvertently attract penalties if one is underpaying due to oversight.

Before delving into negotiations or arrangements with the IRS, clearly understanding one’s financial stance can be empowering. It offers a solid foundation for any discussions, helping to address any areas of contention swiftly. Additionally, organized and accurate tax documentation can expedite proving one’s case or clarifying any misunderstanding, making the IRS tax lien smooth and efficient.

Consult a Tax Professional

After reviewing your tax records, you can contact tax consultancy companies like Amity One Tax for help. Their team of experts is adept at navigating tax liens and can walk you through the possible solutions.

When you engage with their services, their tax consultancy experts advocate to ensure you secure the most favorable outcome with the IRS. Letting a seasoned team like Amity One handle your tax woes can offer peace of mind and significantly increase your likelihood of returning to the IRS on favorable terms.

If you could check out the National Tax Lien Association, an organization dedicated to the tax lien industry, for additional resources and education on tax liens, that would be great.

Settling the Debt

Settling your tax debt is the final step in resolving an IRS tax lien. After reviewing your tax records and consulting professionals, the next move should focus on settling with the IRS.

Various options, such as payment plans, Offers in Compromise, or even penalty abatement, are available. Each of these options has its qualifications and procedures. What might be suitable for one individual might not be for another.

This is another juncture where the expertise of a tax professional can be invaluable. They can help you negotiate the settlement terms, ensuring that the debt repayment plan is one that you can realistically adhere to while possibly minimizing additional interest and penalties.

Taking steps to settle the debt helps remove the IRS lien on your assets and restores your financial freedom and credit reputation. A successful settlement with the IRS requires timely payments according to the agreed-upon plan, so it’s crucial to maintain discipline and commitment.

The IRS will release the lien once the debt is settled and the payment plan is completed. This allows you to regain full control over your assets and provides a pathway to financial recovery. Therefore, paying the debt is the most direct way to resolve an IRS tax lien, clear your financial slate, and move towards a more secure financial future.

Preventing Future Tax Liens

A tax lien, an unwelcome consequence of unpaid tax, is a stain on one’s financial record. Sadly, this signals to lenders that you might have trouble with creditworthiness.

However, avoiding future tax liens becomes achievable with careful planning and the right guidance, such as from Amity One Tax. Being on top of your tax bills and getting to know the tax code’s ins and outs can help prevent tax liens in the future. Individual or institutional investors should keep abreast of their tax responsibilities to prevent unexpected hurdles.

One smart move is to regularly set money aside for tax bills, especially for those whose income might go up and down. This way, you have a safety net if unexpected money troubles pop up, stopping you from paying your taxes on time.

Staying in the know about changes in tax laws is also essential. Remember to mark tax deadlines on your calendar, look into IRS payment plans if needed, and always get professional advice when money problems come up. Steering clear of tax liens isn’t just about planning; it’s about thinking smart with your money and always staying updated.


IRS tax liens can be overwhelming, but the process can be made considerably more manageable with the right understanding, proactive steps, and expert guidance. Individuals and businesses can partner with tax professionals like Amity One Tax to ensure they stay on the right side of the IRS.

As with many financial hurdles, prevention is often easier than cure. With regular financial check-ins, expert consultations, and a clear understanding of one’s obligations, it’s possible to steer clear of IRS tax liens and navigate the economic landscape confidently and easily.

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