A tax lien is a public document that alerts other creditors that back taxes are owed to the IRS and that the government has a legal right to property you own.
In the real world, much like on the playground, tax liens are relatively harmless by themselves but have harmful consequences. The first harmful effect a tax lien has is on your credit score. A tax lien usually subtracts about 100 points from your credit score, and a lower credit score means paying higher interest rates and can affect your ability to get a job or find housing. The second harmful effect is in buying and selling property—especially real estate. It is very difficult to obtain a loan if you have tax liens because once the property is purchased it becomes subject to the lien and this makes lenders nervous. It is also difficult to sell property subject to the lien because the lien travels with the property, and the lien must be paid in full before the buyer can have clear title. If you are thinking of buying or selling real property in the near future you must avoid liens at all costs.
The good news is that with the right resolution in place you can avoid tax liens before they are filed, so make arrangements to reach an agreement with the IRS before it’s too late!
At Wasvary Tax Services we have multiple years of experience with helping our clients with tax lien situations. Our expertise can help guide you in what can often seem like a totally overwhelming, perhaps even impossible, process.
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