Nothing in life is sure except for death and taxes. When it comes to owing the IRS, you can rest your laurels on the fact that sooner or later they will come to collect. When you owe the IRS, there are a handful of ways in which they may come after your assets—one of which is putting a lien on your home. If you’ve received a letter from the IRS notifying you of an impending lien, here are some helpful ways in which you can resolve your debt and protect your property.

Pay Close Attention to Notices

If the IRS has issued you a notice to put a lien on your home, it’s not likely the first time they have reached out to you. Unless you filed with the wrong address on your returns, you should first receive a handful of letters from the IRS before any serious actions are taken on their part. After a notice to put a lien on your home has been sent, you have 30 days to respond and dispute the IRS’s actions. Failing to contact the IRS will only complicate your situation and make it more difficult. Once the IRS has completed the lien process, it’s next to impossible to reverse their actions.

Appeal

Upon receiving any kind of notice to lien or wage garnish from the IRS, you should contact a tax professional immediately so that you may begin the appeals process. Once you file for an appeal, the IRS will halt any actions to collect your delinquent taxes through liens or seizures of assets. During this crucial time period, you and your tax professional should begin to gather any supporting financial documents to state your case before the IRS. Once in the appeals process, you may qualify to resolve your tax debt without paying the full amount owed.

Offer in Compromise

When you owe the IRS back taxes, they may be willing to make an offer in compromise if they don’t think collecting through a seizure of finances, property, or wages won’t get them what they’re owed. When annoying infomercials make grandiose claims that they can settle your IRS tax debt for “pennies on the dollar,” they’re usually referring to an offer in compromise. However, without the help of a tax professional, it will likely be difficult to “strike a deal” with the IRS. If granted an offer in compromise, you will be expected to make one lump sum payment or set up an installment plan.

Payment Plan

If granted an offer in compromise, you may choose to pay back the IRS with a structured payment plan. Even if you don’t qualify, you may be able to consolidate your debt and set up an installment plan anyway. Payment plans are a great way to stop letters from the IRS from flooding your mailbox, plus you can pay what you owe without becoming financially crippled as a result.

Uncollectible Status

If you can show the IRS that paying back your tax debt will cause you or your family severe financial hardship, they may be willing to label your status as uncollectable. The positives of this approach are that you have a year or so to get back on your feet and put your finances back in order. The downside, however, is that your debt will continue to accrue interest for the duration of the period. A tax professional can advise you on whether or not you should take this approach.

File for Bankruptcy

Filing for bankruptcy may not the magical solution you’ve been searching for when it comes to resolving your tax debt. In fact, bankruptcy should almost always be a last resort if you’re in need of tax debt relief. Chapter 7 and chapter 13 are the two most common ways to file: chapter 13 will partially wipe away your tax debt while you pay off the remaining balance (typically in installments), chapter 7 completely eradicates your debt and allows you to start fresh, so to speak. However, the consequences of filing for bankruptcy is that your credit score will drop to 0. If you ever needed a loan to refinance your home, it might be next to impossible to qualify because your bankruptcy will stick with your financial history for seven years.

Don’t hesitate to take action if the IRS has given you notice to put a lien on your home—contact a tax professional immediately.

By Steve Marks

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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