A federal tax lien may be used when taxes remain unpaid. It's a tactic the government utilizes to seize other assets to make up for the taxes that are owed.
As soon as one is put on your assets, it's critical to understand how it's going to impact you and what options you have. Below are four key ways that it could affect you moving forward:
1. It could become harder to get a line of credit.
The tax lien will show up when reports are run. Creditors will see this as both money owed and evidence of significant missed payments, and they may not want to give you credit in the future.
2. Multiple assets could be impacted.
Assets could include things like vehicles, real estate and securities. In addition, if you acquire assets in the future -- before the lien is lifted -- they may also be included.
3. The lien may not be removed through bankruptcy.
Even if your bankruptcy filing is successful, the lien may continue. Back taxes are not eliminated in bankruptcy like other debts.
4. Business assets could also be affected.
Don't assume that only your personal assets are in jeopardy. Significant business assets and professional property could also be included, and this could even apply to any accounts receivable.
A federal tax lien is something you must take seriously, and you need to know what legal options you have. You do have rights and there are ways to remove the lien. It's always better to look into your options than to continue ignoring the back taxes.
Source: Internal Revenue Service, "Understanding a Federal Tax Lien," accessed Aug. 08, 2017