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Last Updated on December 9, 2021
Taxpayers who do not pay their taxes on time can face tax warrants and tax liens. This guide will cover the basics of tax warrants and liens, the effects of tax warrants and liens, tips for how to prevent a tax warrant, alternative options for paying your taxes, and information on how Solvable can help with tax situations.
You may have heard the term tax warrant, but do you know what it means for your financial future if you receive one? A tax warrant is a legal judgment that is filed against you, and once filed, it creates a lien on your real and personal property. For tax purposes, personal property refers to any vehicles, furniture, boats, and personal belongings that are in your possession. Real property is the immovable property that you own such as land, homes, and any supplemental structures associated with your land.
A lien is the legal claim that one party — the government or a lender — has to keep possession of property that belongs to a second party until the debt owed by the second party has been paid off in full. In the case of federal taxes, in order to release the lien, you must fully pay the taxes owed or reach a settlement agreement with the IRS. If a lien isn’t taken care of promptly, the IRS has the right to seize any assets or property currently in your possession.
You’ll receive a tax warrant and, therefore, a lien if you fail to pay your tax balance on time. Tax liens can occur at the local, state, or federal level, and it’s important to stay on top of your finances and pay what you owe in a timely fashion. The best practice for taxpayers to avoid a tax warrant and tax lien is to pay the full tax balance immediately when it’s due.
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The effects of tax warrants and liens can be visible in your financial history and can affect your financial stability for many years. Tax warrants and tax liens can impact your finances in multiple ways including the following:
A tax warrant or lien, whether paid or unpaid, could have a negative impact on your credit score. How the tax warrant or lien affects your credit score is determined by the age of the tax lien, whether it is paid or unpaid, and how much you owe if it’s unpaid. Often, as the age of the debt increases and as the amount owed decreases, the less impact a tax lien will have on your credit.
In addition, a tax warrant and lien may negatively affect your ability to qualify for financing for a new home or vehicle. Since lenders are able to review your credit reports and financial history, they will discover the lien on your report and may choose to deny your loan. A lender would be reluctant to offer someone a loan who already has an outstanding tax balance with the IRS.
Similarly, you may run into difficulties if you’re applying for a mortgage. Mortgage lenders typically require you to first pay off a lien before they’ll issue you a mortgage. If you haven’t paid your taxes, this nonpayment suggests to lenders that you may struggle to pay other bills on time.
Another effect of having a tax warrant and lien filed against you is that the tax lien becomes an item of public record. In some cases, local newspapers and legal journals will list all court filings. Filed liens can also be presented on the internet. This means prospective landlords, employers, and even friends or family could see you have a lien on your property.
According to the IRS, a tax lien will be lifted 30 days after a debt is paid in full. However, it’s important to note that although the debt has been paid, payment of the debt doesn’t immediately extract the lien from your financial history and credit reports. A lien that has been paid off could linger on your credit report for at least seven years after you’ve finished paying it off.
Likewise, an unpaid lien can remain on your credit report for at least 10 years after it has been filed. The simplest and most efficient way to have the lien lifted is to pay your tax debt in full as soon as possible.
First, we want to remind you that it’s important to pay the taxes that you owe in full if you can afford to do so.
The best way to avoid a tax warrant in the first place is to pay your taxes immediately upon receiving information regarding your tax balance. You can pay your taxes from your bank account, by debit or credit card, by mailing a check or money order, or by delivering your payment in person to a local IRS office.
If you are certain that you cannot afford to pay your taxes in full and you owe less than $10,000, you can participate in a Guaranteed Installment Agreement. With this agreement, you and the IRS set the date and schedule for monthly installment payments. Through these monthly payments, the IRS will eventually receive your entire tax balance. The monthly payment amount and duration of payments depends on how much you owe in taxes.
Similar to the Guaranteed Installment Agreement, the Streamlined Installment Agreement can be arranged if you owe between $10,000 and $25,000 in taxes. Again, through the monthly installments, you are able to pay the entire balance that you owe in taxes.
However, before you can participate in a Streamlined Installment Agreement, you have to pay down the debt if it is a sizable amount. Once your tax balance is under $25,000, then you may engage in a Streamlined Installment Agreement.
Another option for preventing a tax warrant is to file an Offer in Compromise. This route is applicable if you are only able to afford to pay a smaller portion of your tax balance. Your Offer in Compromise can either be accepted or rejected. If accepted, you could potentially settle your tax debt with the IRS for less money than the amount that you owe. It’s important to note that there is no guarantee that the IRS will not issue a tax warrant while you’re waiting for an acceptance or rejection on your Offer in Compromise.
If you find that you’ve received a tax warrant, you should try to get your debt paid off as quickly as you can. The only way to have the warrant and lien lifted is to pay the remaining balance in full. If you’re unable to pay the amount that you owe in full, you can find many available options and resources that can help.
If you need a few extra months to pay your tax balance, the IRS may grant you 60 to 120 extra days for you to pay what you owe in full. Since you are only asking for extra time to pay your tax balance, you’re not setting up a monthly installment plan. You’re simply asking for several months to get your finances in proper order so that you can pay your balance. You can ask the IRS for extra time to pay by submitting the Online Payment Agreement Application or by contacting an IRS representative by phone.
If you can afford to pay some of your balance, but not the balance in its entirety, then you can request to set up a monthly installment agreement. If your balance is $50,000 or less, you can apply online for a monthly installment agreement. If your balance is greater than $50,000, you will have to complete a form and financial statement and mail these documents to the IRS. Certain installment agreements allow taxpayers up to 72 additional months to pay their tax balance.
If you’re not able to come up with your tax balance right away, but you have a friend or family member who is willing to loan you the money, a private loan may be a viable option. In this case, your friend or family member would loan you the money to cover your tax balance, and you pay back your lender. You may also try to secure a private loan to pay your balance. Again, you would use the loan to pay off your balance with the IRS, and you pay back the lender.
Lastly, you can always try negotiating with the IRS. If you do not have a feasible way to pay your balance, you could try filing an Offer in Compromise. The IRS may be willing to settle your tax debt for less than the amount that you owe if the agency feels you won’t be able to pay your tax debt in full.
It’s important to contact the IRS for help as soon as you feel an issue may arise that would prevent you from paying your taxes on time. It’s better to contact the IRS beforehand instead of waiting until much later to reach out for help.
When you’re dealing with tax warrants or tax liens, our team at Solvable is ready to help you with any financial problems you may face. Solvable has your back and can help you overcome your debt. We are a company that is passionate about helping Americans find their financial foothold by resolving their debt problems. We have conducted research on many debt-relief companies. Each company we review receives a rating based on multiple factors.
It’s up to you to compare and choose one of the companies we have reviewed. To proceed, you contact the company you wish to work with by placing a phone call or by filling out a brief contact form. Many of the companies we review offer free consultations to see if they are a good fit for your tax issues.
Finally, after your tax warrant or tax lien situation has been resolved, contact a member of our team and let our representative know whether you were happy with your chosen company or whether you’d rather work with a different company to resolve your debt.
When you face a situation involving a tax warrant or lien, you want to get help as soon as possible. Begin your journey down the road to financial freedom by contacting one of the debt relief companies on our list today.
Expert Contributor
Last Updated on December 9, 2021
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