Every time you don't pay the tax balance that appears on your federal income tax return in full before the due date, you create a tax debt. We can file a federal tax lien notice in the public registry to notify your creditors about your tax debt. A federal tax lien is a legal claim on your property, including the property you purchase after the lien arises. The federal tax lien occurs automatically when the IRS sends the first notice demanding payment of the tax debt that is imputed to you and you don't pay the amount in full.
Filing a federal tax lien notice may affect your ability to obtain credit, even though it no longer appears on major credit reports. Once a withholding right is created, the IRS generally cannot release it until the tax, penalty, interest, and registration fees have been paid in full or until the IRS can no longer legally collect the tax. Paying your tax debt in full is the best way to get rid of a federal tax burden. The IRS releases your right of withholding within 30 days after you pay your tax debt.
The “compromise offer” approach can help you resolve the debt with the IRS for less than what you originally owed. You'll have to show that paying off the debt would cause you financial difficulty to qualify. This form of tax relief can help you manage an unaffordable tax burden. Here are three tips to help you manage your tax debt in order to reduce penalties and properly resolve your obligation.
If the IRS determines that you cannot pay any of your tax debts due to financial difficulties, the IRS may temporarily delay collection by stating that your account is currently uncollectible until your financial situation improves. Before accepting any agreement offered by the IRS, people with unpaid taxes should consult a tax professional who specializes in IRS back taxes and collection laws. If you received a phone call claiming to be from the IRS or making any other claim related to a tax debt, this is a scam. Every year, hundreds of thousands of Americans end up in debt to the IRS for not declaring or paying less their taxes, either by mistake or on purpose.
Receiving a letter from the IRS can be a disconcerting experience, because the IRS only sends letters if there is any kind of problem with your return or your tax status. If you don't settle your tax debt and don't pay the IRS what you owe, the IRS may file a federal tax lien notice to protect your interests. A tax lien can affect your ability to get credit, including buying a house or car, or even obtaining a credit card. There are many options to help reduce and, in some cases, eliminate tax arrears, ranging from filing or correcting a tax return to agreements such as reducing penalties, installment agreements, or compromise offers.
However, if the tax is based on incorrect tax information, you may be able to reduce, and even eliminate, the taxes due. Ignoring your taxes will worsen the situation, says Michael Kay, a certified financial planner in New Jersey. If you need help managing tax debt and other financial issues, consider contacting an accredited financial advisor for free. One is to have a tax relief professional negotiate with the IRS a possible reduction in total tax debt.