A federal tax lien is the government’s legal claim against a property when the tax debt is not paid. If the tax lien is not taken care of, a tax levy could come next. This means the property could be taken away in the form of wage garnishments, bank accounts seizures, real estate property, vehicles, or personal property seizures.
On November 2, 2020, IR-2020-248, the IRS announced changes to help struggling taxpayers that were impacted by COVID-19.
IRS Taxpayer Relief Initiative
The IRS has revised its collection process to help COVID-19 related economically distressed taxpayers, especially those who have always filed returns and made payments on time.
The IRS is expanding on its existing tools in the following way:
- Individual taxpayers, who owe less than $250,000, may set up Installment Agreements without financial proof if their monthly payment plan is reasonable.
- Individual taxpayers who owe for only the 2019 tax year, under $250,000, may qualify to set up an Installment Agreement without a federal tax lien being issued by the IRS.
- Qualified taxpayers, who are already participating in the Direct Debit Installment Agreement will be able to use the Online Payment Agreement system to suggest lower monthly payment amounts and change due dates.
- For those who qualify for a short-term payment plan, instead of 120 days, the taxpayer has 180 days to resolve their tax debt.
- Flexibility will be afforded to those individual taxpayers who were unable to meet the payment terms in an accepted Offer in Compromise.
- Instead of automatically defaulting existing Installment Agreements, the IRS will add certain new tax balances to them for individual and out-of-business taxpayers.
Additional Taxpayer Relief Initiative Tools
- Temporarily delaying collection until the taxpayer’s financial situation improves.
- Taxpayers may be able to settle their tax bills for less than what they owed by submitting an Offer in Compromise.
- Reasonable cause assistance will relieve taxpayers from penalties. For taxpayers, who are for the first time subjected to tax penalties, they may qualify for penalty abatement relief.
Removing a Federal Tax Lien
However, if a taxpayer does not qualify for relief and still has a tax lien against their property, don’t keep silent. There are ways to go about removing it according to The Balance.
- If the lien was filed in error
- If a compromise is reached
- If the lien becomes unenforceable due to the expiring of the 10-year statute of limitations
- If the balance has been paid in full
So, if a notice of a federal tax lien has been issued, don’t sweep it under the rug. Look into it with an attorney and see if it can be worked out before more severe penalties occur.