Unpaid taxes can quickly build up penalties, interest, and other added fees. On top of that, the stress of having to resolve unpaid taxes builds as well.
When you have unpaid taxes, you may assume the IRS will send you a big warning before taking action. However, one of the most important things I explain to my clients is that the IRS doesn’t always make its moves loudly. That’s where something called a “silent lien” comes in.
What Is a Silent Lien?
A silent lien is a tool that the IRS uses to make a legal claim on your property when you owe unpaid taxes. This doesn’t show up in public records, but it still gives the IRS rights to your assets. You might not even know it exists until you try to sell your home, refinance, or use certain property as collateral.
Here’s the process:
- The IRS determines that you owe taxes.
- The IRS sends you a formal Notice and Demand for Payment.
- You have to make a payment within the specified time period.
- A lien attaches to your property if you fail to pay within the specified time.
So, why is this important? When there is a lien on your property, you will have limited financial freedom and negotiation power without first paying the lien. On top of that, the lien can eventually be made public if your unpaid taxes are unresolved, which can lead to greater consequences.
I help clients with their unpaid taxes and unfiled tax returns. When I work with someone who has unpaid taxes, my first priority is to bring them into compliance by filing any unfiled tax returns. The IRS won’t even discuss repayment options until the last six years of returns are filed.
The key is to act before the silent lien becomes a bigger problem. Even though you may not see it, the IRS has already taken a legal interest in your property, and waiting only limits your options.