Taxpayers face major consequences for not paying their back taxes on time. In Texas, the IRS has the right to apply a federal tax lien on your property from a house to a car. There are different causes and effects of a lien for unpaid tax debt.
The definition of a federal tax lien
A federal tax lien is a claim made against your property after a failure to pay a tax debt. The lien prevents you from selling the property and restricts the number of interested buyers. The government that makes the lien maintains full control of your property unless you pay off the debt.
The process of applying a lien
The IRS sends you a warning of unpaid debts before applying the lien. This is a Notice and Demand for Payment that explains the liabilities you owe, the methods of payment and the deadlines when to make the payment. When you fail to respond, the IRS sends a Notice of Federal Tax Lien to your creditors and gives them the right to claim your property.
Consequences of a tax lien
A federal tax lien allows the IRS to seize and sell your property to pay off a tax debt. It reduces your credit score, making it more difficult to obtain loans and lines of credit. If your tax lien expires without making a payment, the effects last for 10 years.
A taxpayer’s options after a lien
The Internal Revenue Service has no issues with applying hundreds of thousands of federal tax liens every year. A lien restricts the privileges of using or selling your property as you want to. A tax debtor has various options after receiving a notice or demand for payment from the IRS.