Silent Automatic Lien: Understanding and Dealing with itHave you heard of a silent automatic lien? If not, you are not alone.
This type of lien often flies under the radar, but it can have significant consequences if you find yourself facing one. In this article, we will delve into the world of silent automatic liens, exploring what they are, how they compare to federal tax liens, and most importantly, how to get rid of them.
Silent Automatic Lien
Definition and Function
A silent automatic lien refers to a lien that is placed on your property without any notice or public record. Unlike other types of liens, such as a mortgage lien or a car loan lien, a silent automatic lien is not based on your agreement or consent.
Instead, it arises automatically under certain circumstances, such as when you owe taxes to the government. The function of a silent automatic lien is to secure the government’s interest in collecting unpaid taxes.
By placing this lien on your property, the government ensures that it has a legal claim over your assets. This means that if you decide to sell or transfer your property, the government will have the right to satisfy the unpaid tax debt before you receive any proceeds.
Comparison to Federal Tax Lien
You may be wondering, how does a silent automatic lien differ from a federal tax lien? While both types of liens are related to unpaid taxes, there are some key distinctions to be aware of.
A federal tax lien is a public record, which means that it is visible to anyone who searches for it. This can have a negative impact on your credit score and may make it difficult to obtain credit or loans.
On the other hand, a silent automatic lien is not publicly recorded, so it won’t have a direct impact on your credit score. However, it is important to note that if the government chooses to enforce the silent automatic lien, it can result in serious consequences.
For example, the government can initiate tax levies, which allow them to seize your assets, including bank accounts, investment accounts, automobiles, and even real property.
Getting Rid of a Silent Automatic Lien
Methods to Remove a Silent Automatic Lien
Fortunately, there are ways to remove a silent automatic lien and free yourself from its constraints. Here are some methods you can consider:
– Paying your taxes in full and on time is the most straightforward way to remove the lien.
Once the debt is satisfied, the lien will be lifted, and you can regain control over your property. – Declaring bankruptcy may also help to eliminate a silent automatic lien.
However, it is essential to consult with a bankruptcy attorney to determine if this is the right option for your financial situation. – Keep in mind that there is a time limit for collections.
In some cases, if the government fails to collect the taxes within the specified time period, the lien may expire. – Negotiating an installment agreement or an offer in compromise with the Internal Revenue Service (IRS) can provide an opportunity to settle your tax debt for less than the full amount.
These options require demonstrating your inability to pay the full debt and a willingness to work towards resolving the issue.
IRS Actions if Taxes Remain Unpaid
If taxes remain unpaid and the government chooses to enforce the silent automatic lien, the IRS can take several actions to satisfy the tax debt. This can include initiating tax levies, which allow them to seize your assets.
The IRS can freeze and seize your bank accounts, leaving you without access to your funds. They can also seize investment accounts, automobiles, and even real property.
The seized assets will then be sold, and the proceeds will be applied to your tax debt. It is important to note that while these actions may be taken, the IRS generally prefers to resolve tax debt through negotiations rather than enforcement.
Conclusion:
Understanding how a silent automatic lien works is crucial, especially if you find yourself in a situation where your taxes remain unpaid. By familiarizing yourself with the methods to remove a silent automatic lien and the potential actions the IRS can take, you can take appropriate steps to address the issue.
Remember, timely payment of taxes and open communication with the IRS are keys to avoiding the potential consequences of a silent automatic lien.
Differences between Lien and Levy
Definitions and purposes
When it comes to dealing with tax debt, two terms that often come up are lien and levy. While these terms may sound similar, they have distinct meanings and purposes.
Understanding the differences between a lien and a levy is essential for navigating the complexities of tax-related issues. A lien is a legal claim or security interest that the government places on your property as a result of unpaid taxes.
It serves as a notice to others that you owe a debt to the government. The purpose of a lien is to provide the government with a legal right to your property, which can be used as collateral for the unpaid tax debt.
This means that if you try to sell the property, the government has the right to satisfy the debt with the proceeds before you receive any funds. On the other hand, a levy is the actual seizure of your property to satisfy the tax debt.
Unlike a lien, which is a claim on your property, a levy gives the government the authority to take possession of your property and sell it to pay off the debt. Essentially, a levy is the enforcement of the lien.
IRS Authority for Levying Property
The Internal Revenue Service (IRS) has the authority to levy various types of property to satisfy unpaid taxes. Let’s take a closer look at some specific examples:
1.
Seizure of Motor Vehicles: The IRS can levy your car, boat, or any other motor vehicle you own. The seized vehicle will be sold, and the proceeds will be applied towards your tax debt.
It is important to note that exemptions may exist for certain types of vehicles used for work or necessary transportation. 2.
Seizure of Real Property: If you own a house or any other real property, the IRS can levy it to satisfy your tax debt. However, the government prefers not to use this option unless necessary, as it involves a more complex process and can impact innocent parties, such as tenants.
3. Wage Garnishment: The IRS can levy your wages or salary by notifying your employer to withhold a portion of your income to pay off the tax debt.
The amount that can be garnished depends on your income and the number of dependents you have. 4.
Retirement Accounts: While the IRS generally does not levy retirement accounts, there are certain circumstances where it can be done. For example, if your retirement account has been used for prohibited transactions, such as early distributions, the IRS may seize the funds.
5. Dividends and Bank Accounts: The IRS has the authority to levy your bank accounts and any dividends you may receive.
It is essential to maintain open communication with the IRS and address the tax debt to avoid this type of levy. 6.
Licenses: The IRS can also levy licenses that you may hold, such as a professional license, in some cases. This type of levy can hinder your ability to practice your chosen profession until the tax debt is resolved.
7. Rental Income: If you own rental properties and have rental income, the IRS has the power to levy that income.
They can instruct tenants to pay the rent directly to the IRS instead of to you. 8.
Accounts Receivables and Commissions: If you have outstanding accounts receivable or are owed commissions, the IRS can place a levy on those amounts, ensuring they are paid directly to them. 9.
Cash Loan Value of Life Insurance Policy: The IRS can levy the cash loan value of your life insurance policy to satisfy your tax debt. This means that if you have borrowed against your policy, the IRS can collect the borrowed amount.
It is worth noting that the IRS generally prefers to resolve tax debt through negotiations, such as installment agreements or offers in compromise, rather than resorting to levies. However, if other methods fail or if the taxpayer refuses to cooperate, the IRS may resort to levying assets to ensure the collection of the unpaid taxes.
By understanding the differences between liens and levies and being aware of the IRS’s authority to levy property, you can take appropriate steps to address your tax debt and avoid the consequences of having your assets seized. Timely payment of taxes, open communication with the IRS, and exploring available options for resolving the debt can help you navigate this challenging situation.