Understanding Tax Liens
Tax season is upon us. As a business owner, it is imperative to maintain good standing with the IRS by paying your taxes (both personal and business) when due. Otherwise, you may be facing a tax lien.
A lien is issued when you fail to pay your taxes on time. This means that the federal government has first “dibs” on your property and can eventually seize it to recoup the unpaid taxes. This includes all property, including intellectual property, patents, stocks and the like, and can leave your business reeling if not handled quickly. The Notice of Federal Tax Lien issued by the IRS is public information, and your ability to procure a loan, open credit accounts, and even take on new clientele may be compromised.
Fortunately, it is fairly simple to work out a payment plan with the IRS should you find yourself unable to pay your tax bill. They don’t want to spend the resources on actually seizing your property and accounts, and are easy to work with if you adhere to the terms. The most important factor is to be ahead of the government on your tax bill and make arrangements before you’re faced with a tax lien.
How Do I Handle A Tax Lien?
If you have already been notified of a lien by the federal government, there are a few things you can do to resolve the issue. First, reach out to the agency who placed the lien and make sure you understand the specifics. if you have an accountant or tax representative, even better. Ask them to make contact on your behalf and work out a payment plan.
In some certain situations, the government may be willing to work with you on reducing the impact of a lien. These options include:
Discharge of Property: when the lien is removed from a specific property. An example would be the government removing the lien from your home but maintaining it on any business property you own.
Withdrawal: when the IRS removes the public Notice of Federal Tax Lien and is no longer competing with other creditors for payment.
Subordination: when the IRS maintains their lien but gives up their “first dibs” status, allowing other creditors to move ahead of them in obtaining money from you. This can provide some relief as far as your ability to work with a debt consolidation agency or work out loan terms.
None of these conditions get you out of paying those taxes, but it may be helpful to explore the options and see if you’d qualify for some extra help. More information can be found on the IRS website.
The bottom line? Paying your taxes on time is your best bet. If you’re struggling to make your payment on time, reach out to the IRS. Avoiding their notices will only hurt you and your business in the long run. With direct communication and proper planning, you can resolve any issues and keep your business safe from tax liens.