If you are an American living abroad, Federal Tax Liens can really make your life overseas miserable! Dealing with the Internal Revenue Service while residing in the US is a big hassle and when you are an expatriate residing abroad it is even more troubling to resolve IRS issues. We at US Expat Tax Help understand that being dealing with the IRS from abroad is difficult and can cause you unnecessary stress. We have the expertise and experience to help you and give you peace of mind.
What is a Federal Tax Lien?
An IRS Tax Lien is the governments claim against your property when your US taxes owed are not paid to the IRS. The IRS establishes a lien against all of your assets including financial assets, personal property and especially real estate. This gives the IRS the legal right to collect taxes from the sale of your assets, which includes just about everything you own. The lien can be against you, your spouse, or your company. A lien against your company would seize your accounts receivables. At this point everything you own is just one short step away from becoming the property of the United States Government.
If I am living overseas, can the IRS still file a lien against my foreign assets?
Yes. Regardless of where you live, the IRS can file a lien against your assets regardless if the assets are located in the US or in a foreign country. Just as long as you own the assets, they are subject to levy. However, the IRS is legally unable to take administrative actions against your foreign property unless there is a treaty provision.
The IRS currently has tax treaties with over 60 countries. The treaty must have a collection assistance provision that permits the IRS to take action against your foreign property. Several tax treaties have extensive collection provisions while 24 have limited collection provisions. The tax treaty provisions are somewhat complicated, so it is always recommended to contact a tax professional who is experienced in expatriate taxation.
If you are living overseas, you are required to file a tax return each year if you meet the minimum filing requirements. If you don't file a tax return, the IRS can file a Substitute for Return (SFR) for you.The IRS will then send you a notice to your last known address that explains the balance due and will demand payment in full. If you do not inform the IRS of your address overseas and it is sent to your last known address, it is still considered a valid notification. The lien will arise when you fail to pay the taxes in full within ten days after the IRS sends the first notice of taxes owed and demand for payment, and they make an assessment of the tax. The lien will generally not be released until the taxes, penalties, interest and recording fees are paid in full or the IRS may no longer legally collect the tax.
Which assets can the IRS levy?
If your taxes remain unpaid, the IRS can use a levy to collect taxes. The IRS can levy assets such as wages, bank accounts, Social Security benefits and retirement income. They can also seize your property and sell it to pay your tax bill. Property they can seize includes any real estate you own, your car and boat. Additionally, the IRS can apply any future federal and state income tax refunds to satisfy your debt.
Will an IRS Tax Lien hurt my credit?
Liens filed against you by the IRS are a matter of public record and will show up on your credit report and often prevent you from opening a checking account or borrowing against any assets, like your home. The banks don't want the extra work when the IRS comes in to take your money.
With a Federal Tax lien on your record you can't get a reasonable loan to purchase a car. Think about paying 18-22% interest on a car that is already too expensive. You definitely cannot buy or sell any real estate. The list is endless.
How do I get the lien released?
To get the lien released, you must pay the tax, penalties, interest and recording fees in full. If you cannot pay the full amount, the IRS offers several payment options to satisfy the debt. These include a monthly installment agreement. If you cannot pay the full amount under an installment agreement, an Offer in Compromise may be an option for you. If you are unable to pay due to a current financial hardship, the IRS may temporarily suspend certain collection action. Each taxpayer's situation is unique so please contact us today to find out which is the best option for you.