Dealing with Tax Lien Issues in New York

New York City residents have federal and state tax obligations. If you don’t pay your taxes, you are subject to penalties including an Internal Revenue Service lien. A lien is not the same thing as a levy. A lien simply secures the government’s interest in your property, which means that it can take your property if you do not pay. But, before the IRS can seize your property, it must file a levy. The lien works much like a mortgage — it is a document that states your property is collateral for the amount you owe.

How to Avoid an IRS Lien

NYC Tax LienIf you receive a letter from the IRS stating that you have taxes and/or returns due, don’t ignore the letter — the problem will not go away by itself. If you can’t pay the entire amount, contact the IRS and let them know. You may be able to make a payment plan.

If you are not comfortable with dealing with the IRS, you can contact a New York City tax and bankruptcy attorney to help you with your correspondence with the IRS.

How to Remove an IRS Lien

The only way to remove an IRS lien is to pay the taxes you owe. If you can’t pay the entire amount in one payment, the IRS will most likely work with you to accept payments. You will have to contact the IRS to set up a payment plan, if they will accept payments on your tax due.

What Happens if You Don’t Make the Payments

The IRS will mail you a Notice of Intent to Levy. It must notify you before it collects your property. If you get a Notice of Intent to Levy, contact a tax and bankruptcy attorney as soon as possible. Do not wait until the last minute, or you may find your property gone.

What is an “Automatic Stay?”

When you file bankruptcy, a stay is placed on all of your creditors, including the IRS. This means that no creditor can continue collections during your bankruptcy proceeding. The stay is in place until the bankruptcy court lifts it or until your bankruptcy is discharged. Creditors, including the IRS, may motion the court to lift the stay. If the court lifts the stay for a particular creditor, that creditor may recommence collections.

Does Bankruptcy Eliminate My Tax Debt?

Only certain taxes may be eliminated by bankruptcy. An experienced New York City bankruptcy attorney can advise you on how bankruptcy affects your tax debt. The IRS has several rules and regulations regarding the discharge of tax debt in a bankruptcy, and whether a debtor may receive a discharge.

Does it Matter if You File Chapter 13 or Chapter 7?

The bankruptcy court treats tax debt in different manners for Chapter 13 and Chapter 7 bankruptcy filings. You must file a means test to determine whether you can file for Chapter 13 or Chapter 7. Once your New York City bankruptcy attorney determines which chapter you are entitled to file, he or she will explain your rights regarding taxes and tax liens to you.

Do I Owe Taxes and Am I Being Penalized?

If you do not understand the letter the IRS forwarded to you regarding the amount you owe, whether you owe penalties, or if you understand the letter, but do not agree with it, contact a New York City tax and bankruptcy attorney to help you with your correspondence to the IRS.

Do You Still Have to File Tax Returns After Filing Bankruptcy?

Yes, you must file your returns. The bankruptcy court may dismiss your bankruptcy if you do not file your tax returns. An experienced New York City tax and bankruptcy attorney will advise you of your rights pertaining to tax returns and your bankruptcy filing.

An experienced tax and bankruptcy attorney will help you determine whether you should pay overdue taxes, object to them, or file bankruptcy to protect you from an IRS levy. The attorney will also explain your rights to you — in plain language so that you can help the attorney decide on your next course of action — one that will benefit you the most.

photo By 401(K) 2013