That time of year has crept up swiftly yet again… tax time. Whether you’re a seasoned pro or hand your taxes off to a tax preparer every year, tax time tends to bring some sort of stress with it.

While some tax payers feel confident about filing, more than half of Americans feel they pay too much in taxes every year. What happens if you are unable to pay your tax debts?

When you neglect or are unable to pay taxes, the federal government has a legal claim to your property. This protected legal interest in property is known as a federal tax lien. Here are four things you should know about federal tax liens.

1. Tax Liens Can Happen Automatically

Also referred to as a statutory lien, federal tax liens can arise after a period of 10 days of unpaid taxes. If you owe any tax debts, the unpaid amount automatically means a statutory lien gets attached to your personal property.

This doesn’t mean you must sell your property if a tax lien has been attached to it. This simply means the IRS is first in line as having a claim to the property in question.

2. They Have an Expiration Date

Tax liens do have an expiration date if the tax liability does not get satisfied. The IRS has ten years after the date of assessment to collect the unpaid taxes. This date can be extended for a number of reasons such as:

  • An Offer in Compromise gets filed
  • The lien gets refiled during a refiling period
  • The taxpayer resides outside of the US
  • Taxpayer files for bankruptcy

There are a number of ways the IRS can choose to extend the collection of an unpaid lien – these are simply a few examples.

3. Tax Liens Don’t Require You to Sell Your Property

While a federal tax lien gives the federal government a priority place in line to your property, tax liens don’t require you to sell your property off if you have a tax lien put in place.

The presence of a property lien simply means that if you ever attempt to sell your home, the Internal Revenue Service could lay claim to a portion of the sale proceeds in order to cover your outstanding lien debt.

4. Tax Liens Don’t Show on a Credit Report

Up until 2018, the three major credit bureaus included tax lien information on credit reports. Now, tax lien information is no longer collected on reports. However, federal tax liens are made available as public information.

This means that landlords, lenders, and employers are able to see tax liens against your property. While a lien won’t affect your credit score outright, that information can be used to deny you a loan or approve you for a rental.

What to Do With a Federal Tax Lien

A federal tax lien is a tool used by the federal government to collect unpaid taxes. Options for relief of an outstanding lien will look different depending on the individual taxpayer.

At Clean Slate Tax, we help individuals and businesses with a variety of tax problems including tax liens. From tax preparation to tax resolution, we’re here to analyze each customer’s unique tax situation.

Contact us today for a free consultation! We’d love to help start your next tax year off with a clean slate.