The COVID-19 pandemic has resulted in a lot of confusion in the market and the economy. Many industries struggled to get by effectively and were forced to downsize.
Taxpayers affected by the pandemic had to tighten their belts due to mandatory and voluntary shutdowns in many industries.
Sometimes state and federal governments have to do the same but may not always publicize it. As a result, they end up owing back taxes, which they may choose to take care of through back taxes and taxes liens.
But what is a tax lien, and what do you do if you get one? We’re here to explain everything you need to know.
What Is a Tax Lien?
A tax lien is a government claim on your property to secure payment of your tax debt. If you don’t pay your taxes, the IRS can file a notice of federal tax lien.
This will give them a legal claim on your assets. The IRS can then sell your property to pay your tax debt. But once you pay your debts, the lien will be removed.
To understand a tax lien, it’s essential to know how taxes are collected in the U.S. Taxes are broken down into two categories: federal and state taxes.
Individuals and businesses pay federal taxes based on their income levels. Meanwhile, a state tax lien is paid by individuals and companies based on where they reside.
What to Do if You Get a Tax Lien
If you get a Tax Lien, you must take action immediately. First, you will need to pay them in full.
You cannot contest a tax lien or try to negotiate a lower payment amount. But you can hire a tax relief professional to make arrangements with the government to pay in installments with interest and penalties.
The sooner you pay, the less you will owe interest and penalties. The debt will be collectible by the creditor and will show on your credit report.
If you believe you do not owe the taxes listed on the lien, you can contact the creditor or the taxing authority to verify your debt. Sometimes taxpayers have errors on their returns that can result in a lien being issued in error.
If this is your situation, you should contact the creditor immediately. Try and rectify the mistake and avoid having a lien filed against your property.
If you do not pay your taxes or contest the tax lien, the creditor may seize any assets attached to the debt. These assets can include your bank accounts, cars, and homes.
If this happens, it is essential to contact a lawyer as soon as possible. There may be legal options available to you.
Need additional info about tax liens? Then click for more here.
It’s Not the End of the World!
There is still hope if you are one of the unlucky few who has received a tax lien. It’s not the end of the world, and you can do some things to minimize their impact on your life.
First and foremost, make sure to get qualified professional help if you don’t understand what is a tax lien. Also, try to resolve the debt as quickly as possible to manage your finances. If all else fails, consult with an attorney about your options. Good luck!
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