Liens are filed by the IRS when the employee (or employee's manager) believes the IRS should protect the Government's interest by notifying the public (via a lien) that the IRS has a claim against you. The lien is most effective against real estate owned by the taxpayer in the same county. Often, the IRS will file a lien(s) against the wrong person or entity. When this happens, the IRS must remove the lien within 30 days of receiving proof they are in error. This is a rule that is rarely enforced. From a practical standpoint, once a lien is filed against you, it is a real pain in the neck to get it released and to deal with all the aftershocks from creditors, banks and credit bureaus.
The IRS lien program is highly automated now. In addition, practically any IRS employee (even a TEMP) can permanently damage your reputation by filing a lien in error, prematurely, or negligently.
The Federal Tax Lien filed by the IRS attaches to everything you own, but not really. Be very careful about attempting to avoid collection by transferring assets after a lien is in place (Date recorded at your county) It is that date that determines who gets paid first from the proceeds of real estate.
Avoid the filing of liens by the IRS. If you think you might have a problem with the IRS, there is nothing illegal or immoral about protecting your assets by transferring or selling them PRIOR TO THE LIEN BEING FILED. You will then be in a much better position to negotiate as you will own fewer assets reachable by the IRS.
Other ugly news about Federal Tax Liens---They ruin your credit, even when issued erroneously. The lien survives all types of bankruptcy, so even if you could bankrupt out of some IRS Debt, they will be waiting there with a hand out to collect on your property after bankruptcy is discharged. The lien will ruin your banking relationships and most lending relationships making it difficult to do business in today's world. As long as the lien is on, no one will want to loan you money for a house, car, RV or anything else. The common belief is that the lien entitles the IRS to take anything from you they decide to. This is not true but has become common belief among banks and lenders due to their experience with borrowers who have IRS difficulties.
Avoid a lien if at all possible. However, if your credit is already shot, don't lose sleep over the lien. It is just one more bullet in a bullet riddled time in your life. Call me. Let me help.
- Randy Anson