Posted in Blog  
  on Mar 17, 2015

How Long Does a Tax Lien Last

Tax liens can be rather confusing. They are issued when a tax cannot be paid for some reason and local, county, and the Federal government all have the ability to issue a lien. They are generally put into place after a demand for payment is sent out and the taxpayer is unable or unwilling to pay the debt. The easiest way to get rid of a tax lien is to pay the liability. Once the tax is paid in full, the tax lien must be discharged. If that lien cannot be paid in full, however, many may wonder how long a tax lien will stay on property that is owned. Here are the answers.

 

1. Tax Liens Last Until the Expiration of a Statute of Limitations

Most tax liens can be collected on for a period of 10 years. There are some exceptions to this rule and taxpayers themselves may authorize a longer collection period through compromise or litigation. If a bankruptcy petition is filed or the taxpayer is outside of the United States for a minimum of 6 months, then collection attempts are suspended for the amount of time the taxpayer is in bankruptcy + 6 months or the amount of time they are outside the US.

2. Bankruptcy Doesn't Discharge a Tax Lien

Although the debt responsibilities of a tax lien can be discharged through a bankruptcy, the tax lien itself does not need to be canceled. Those who own the tax lien will generally discharge the tax and release the lien in a bankruptcy, but the courts have set the precedent that the lien will stay in place until the 10 year period has elapsed.

 

3. They Can Be Made to Last Indefinitely

If a taxpayer is sued for their tax debt that already has a lien issued and the holder of the lien wins a judgment, then the tax lien can last for an indefinite period of time. In this circumstance, even the death of the taxpayer does not protect against assets being collected from the lien. The IRS, for example, is still pursuing a tax lien judgment for Al Capone.

4. Tax Liens Aren't Just Against Real Estate

A tax lien can be placed on virtually any item a person owns. With a judgment in place, there is even the possibility of items being seized and sold to pay the tax lien. This seizure includes future interests. There are virtually no exceptions to this rule except for Native American lands that are owned in restrict land areas held by the US. Even though there is a 10 year statute of limitations, a lawsuit can be filed at any time in those 10 years. This means the easiest way to avoid a tax lien is to just pay it off as soon as possible.


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