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Tax Lien Law

What is a federal tax lien?

The government may make a legal claim against an individual’s property and assets if he/she fails to pay a tax debt. This claim is called a tax lien. A lien can be placed on all of an individual’s property like real estate, personal property and financial assets. The IRS will make an assessment of the individual’s liability and send him/her a bill explaining how much he/she owes the government. A lien will be placed on the individual’s properties only if he/she ignores this bill and fails to repay the debt on time. Read below where Experts have answered many more questions about the tax lien laws.

What can an individual do if a state tax lien has been wrongly added to his/her credit report?

Most of the times, people are given dispute forms along with their credit reports. If the individual did not receive this form, he/she may need to write the bureau and inform then about any wrong items on the credit report. The individual may request the bureau to conduct an investigation into his/her file. The credit bureau may have a period of 30 days from the day it receives the request to conduct an investigation. Sometimes, this time period may be extended to 45 days if the individual has not given sufficient documentation to support his/her specific claim. Once the investigation is done, if the bureau cannot verify the debt, it will be removed from the report. The bureau may then inform the individual about the result in writing within 5 days and send them a new credit report. If the credit bureau does not co-operate with the individual, the individual may file a complaint with the Federal Trade Commission.

For how long would a state tax lien remain on an individual’s credit report?

A state tax lien may remain on an individual’s credit report for a period of 7 years after it is paid off and released. It will automatically be removed from the report at the end of 7 years.

If an individual pays off a tax lien for his/her spouse, would it be deductible from his/her taxes?

If the individual files for a joint tax return with their spouse, then any tax lien payment regarding property tax, state income tax or real estate tax may be deductible of Schedule A. The interest paid, penalties and any legal fees may not be deductible. However, if the individual does not file a joint tax return with the spouse, the amount paid for the lien may not be deductible.

Can the IRS confiscate an individual’s assets to satisfy a tax debt?

The IRS may be able to remove certain assets of an individual in order to satisfy a tax debt. Most of the times, the IRS may register a tax lien on the individual’s title over the assets so that the individual cannot sell it or refinance it without contacting the IRS.

How can a person find out if someone has a federal tax lien?

Liens are normally attached to an individual’s assets like property, vehicles, securities, etc. If a person owns property, the individual may check their property records to see if there is a lien against the property. The individual may check at the County Recorder’s office for such a lien. Federal tax liens may be attached to an individual’s business as well. Liens will also appear on people’s credit reports. The individual may check the person’s credit report if he/she wants to search for a tax lien.

How would a lien affect a foreclosed property?

A lien may not have any kind of effect on a foreclosed property. Hence, the new owner of the property may request for the lien to be removed. However, the individual against whom the lien was filed will still have to pay the tax.

Tax lien laws may differ from state to state in the US. You must be aware of the laws that apply to your state so that you know what action you may take in case a lien is attached to your property. Understanding these laws will also help you determine if a lien has been wrongly attached to your property or how you can get it removed. You may seek the help of an Expert if you need further information about tax lien laws.
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