Facing a business tax lien can feel overwhelming. If the IRS has placed a lien on your company, it means the agency has taken legal steps to secure payment for unpaid taxes. This is not a situation to take lightly.
A tax lien can impact your ability to secure loans, make deals, and even maintain your business’s reputation. However, this does not mean your company is doomed. You have several options to resolve the issue and move forward.
What Is a Business Tax Lien?
A business tax lien is a legal claim placed on your company’s assets by the IRS when you fail to pay your business taxes. The IRS has the power to issue liens on your business’s property, such as bank accounts, real estate, and equipment, to guarantee payment.
This lien gives the IRS a priority claim over your assets if the debt isn’t paid. It essentially acts as a “warning” that you owe taxes, and the IRS intends to recover those funds, either by seizing property or negotiating a payment plan.
How Does a Business Tax Lien Work?
When you miss tax payments for your business, the IRS will send you multiple notices asking for payment.
If you ignore these, or if the payments are not made, the IRS can place a lien on your business. The lien serves as an official public record that shows the government has a legal interest in your property until your debt is satisfied.
Once the lien is in place, the IRS can pursue a variety of actions to recover the owed funds, such as garnishing wages or levying assets.
Additionally, a business tax lien can severely impact your credit score. This makes it harder to secure financing or conduct business deals. The lien remains active until the debt is either paid in full, settled, or resolved through other means like bankruptcy.
What Can Happen If You Don’t Address the Business Tax Lien?
Ignoring a tax lien is not an option. If you allow it to remain unresolved, the IRS can take drastic steps to recover the owed taxes, which could include:
- Seizing Assets: The IRS can seize business assets like bank accounts, inventory, or property.
- Wage Garnishment: The IRS can take a portion of your wages or business revenue directly to cover the owed taxes.
- Reduced Creditworthiness: A tax lien appears on your public records. This can hurt your credit rating and limit your financing options.
- Possible Sale of Property: If the lien is not addressed, the IRS can eventually move to sell your assets to recover the debt.
The longer you wait to address the lien, the more likely these consequences become. It’s important to act quickly and work toward resolving the issue to avoid escalating financial difficulties.
Steps to Take When You Get a Business Tax Lien
Review the Lien Notice Carefully
The IRS should send you a Notice of Federal Tax Lien (NFTL) once they file the lien. Review this notice carefully. It will outline the amount owed, the tax period in question, and the steps to take next.
Sometimes, the lien is issued by mistake or due to a simple error in records. If you believe this is the case, contact the IRS immediately to resolve the issue.
Consult with a Tax Professional or Attorney
Handling a business tax lien is not something to tackle alone. A tax attorney who specializes in tax resolution can help you understand the situation better.
They can communicate with the IRS on your behalf and help you explore your options, such as negotiating a payment plan or filing for an Offer in Compromise.
Pay the Debt in Full
The most straightforward way to deal with a tax lien is to pay the debt in full. This might not always be an option, especially for smaller businesses with cash flow issues.
Nevertheless, if you are able to pay off the debt, the IRS will release the lien once the payment is processed. You will also receive a notice confirming the lien’s release. This can help your business resume normal operations without further hindrances.
Set Up an Installment Agreement
If you cannot pay the full debt at once, setting up an installment agreement with the IRS is another viable option. This allows you to make monthly payments toward the debt over time.
In many cases, the IRS will allow businesses to continue operating while making payments. However, interest and penalties may still accrue on the outstanding balance. Make sure to factor these into your payments and avoid missing any deadlines.
Consider an Offer in Compromise
An Offer in Compromise (OIC) is a program that allows taxpayers to settle their debt for less than the full amount owed. The IRS will only accept an OIC if they believe you cannot pay the full amount or if the amount owed is significantly more than what your business can reasonably afford to pay.
If you believe that your tax debt exceeds your ability to pay, consulting an Offer in Compromise tax service might be a good option. However, not all businesses qualify, and the IRS has strict guidelines for approving offers.
Request a Withdrawal of the Lien
In certain cases, you can request the IRS to withdraw the lien, especially if you meet specific criteria. If you enter into a payment agreement, such as an installment plan, the IRS may agree to withdraw the lien from your records.
This is different from removing the lien–which would be a permanent action. Withdrawal just means the IRS will not actively enforce the lien, though it may remain on your records.
Look Into Other Relief Programs
If your business is going through severe financial hardship, you may qualify for tax relief programs such as Currently Not Collectible (CNC) status. This means that the IRS temporarily suspends all collection efforts because they acknowledge that your business cannot pay at this time.
Keep in mind that while CNC status can provide temporary relief, the tax lien may remain active until the debt is paid in full.
Impact of a Business Tax Lien on Your Business
A tax lien can have significant consequences for your business beyond just the legal claims on your property. Below are some of the ways a tax lien can affect your business:
- Credit Damage: A tax lien will be reported to credit agencies, which could severely damage your credit score. This could make it harder to obtain loans, negotiate leases, or even establish business partnerships.
- Operational Challenges: With a lien on your property, you may find it difficult to secure financing or sign contracts for new business ventures. This can stall growth and hinder your ability to take on new projects.
- Stress and Distraction: Dealing with a tax lien can cause emotional and financial strain on business owners. It can take up valuable time and resources–diverting attention away from running the business effectively.
- Asset Seizure: If the debt remains unresolved, the IRS may seize your business’s assets to recover the owed taxes. This can include equipment, property, and even funds in your business bank accounts.
Facing a Business Tax Lien? Let Our Attorneys Help You Resolve It Quickly
Dealing with a business tax lien is stressful but not insurmountable. With the right approach and professional help, you can resolve the lien and move forward.
At Rush Tax Resolution, we specialize in resolving complex tax issues, including business tax liens. Our team of experienced tax attorneys is ready to fight for you and protect your assets.
With a proven track record and the trust of clients like Sean Hannity, we focus on delivering results quickly and efficiently. Call us at 855-477-2255 for a free consultation. We’ll assess your case upfront and only take it if we know we can help.
Don’t let a tax lien hold you back—take action now and get the relief you deserve.