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Tax Liens and Levies

When a taxpayer owes back taxes, the IRS and State Tax Agencies can impose a Tax Lien on their real and personal property If they meet specific statutory requirements. This Tax Lien attaches to all rights, titles, and interests of the taxpayer, allowing the IRS or State Tax Agency to enforce the lien by seizing their assets.

A Tax Lien is filed by the Government to protect its interests and is recorded with one or several county or state recorders. It serves as a public notice that the taxpayer owes back taxes and can significantly damage the taxpayer’s credit. Tax Liens make it challenging to obtain credit or engage in real estate transactions such as buying or selling property.

The Federal Tax Lien statute stipulates that when any person fails to pay any assessment of tax, along with interest, penalties, or costs, a Tax Lien in favor of the United States arises upon all property and rights to property belonging to the taxpayer. This Lien encompasses all types of property, whether real or personal, tangible or intangible. Even if the taxpayer makes a partial payment, a Tax Lien can still arise for the balance of the tax.

Although taxing agencies are generally hesitant to release or modify Tax Liens, there are possibilities to persuade the government to subordinate its Tax Lien to a lender. This would enable the client to borrow money against their assets to satisfy all or part of the Lien. There are also provisions for removing Liens from certain property even if the Government does not have a financial interest in the property. This removal of the Lien is referred to as “a Discharge of the Lien.” Additionally, we thoroughly verify that the tax agencies have met all legal requirements for a valid Tax Lien filing. If any defects are discovered in the Tax Lien process, we will immediately appeal the filing of the Lien.

We have also achieved success in requesting the Lien to be withdrawn or released for a variety of reasons. Some clients simply made an error or experienced a traumatic event that prevented them from paying their taxes on time. If successful, the Lien filing will be expunged from your credit report and credit score.

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"The Backdoor Roth and Mega Backdoor Roth are powerful strategies that can be used to “superfund” your retirement savings with tax-free growth. Many taxpayers believe they are ineligible to contribute to Roth accounts due to high earnings, however there are methods to fund these accounts even if income limits are exceeded."

Joe Allen, CPA
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