A lien is a legal method for someone who is owed money to lay a claim on the property of the person that owes them. One entity that can place them is the Internal Revenue Service (IRS).
A lien does not give the IRS the right to take your assets outright. Think of it as more of a freeze on them. So if you wanted to sell your property and flee the country without paying your overdue taxes, a lien could prevent you from selling the property without an arrangement in place to compensate the IRS from the proceeds.
If the IRS wanted to take your property directly as payment for your outstanding dues, they would need something called a tax levy. If you address the tax lien when you receive it, you can avoid the IRS proceeding to the tax levy stage.
Can I escape the tax lien?
If you can pay the tax lien in full, then the IRS will be happy, and you can once again do as you wish with your assets. If that is not possible, you have a couple of options:
- Contest the amount: If you disagree with the figure that the IRS says you owe, seek legal help to challenge it. Ideally, you would do this before they get to the stage of placing the lien, but it is better late than never.
- Negotiate: Let’s say business has been awful, and you do not have the money to pay. The IRS is willing to listen to your arguments, and while they won’t absolve you of your debt, they may agree to reduce it or accept partial payments over time.
A tax lien could be the beginning of the end for your business if you ignore it. Yet, with appropriate legal help, it could be just one more bump on the roller coaster ride of business.