The Potential Consequences Of An IRS Tax Lien Against Your Business & How To Address It
In this article, you can discover:
- The consequences of an IRS tax lien on a business.
- What types of business balances can lead to Trust Fund Assessment and personal exposure, including tax liens against personal assets.
- How to protect business and personal interests and challenge the validity of a tax lien or enforced collection action.
- Ignoring a tax lien will have consequences – what are the options for addressing the fall-out if a business does.
What Are The Potential Consequences Of An IRS Tax Lien Against A Business?
An IRS tax lien against a business can have significant implications. It is crucial to address this issue promptly and effectively. Our firm specializes in lien identification, application, and strategy creation regarding IRS and state tax liens against businesses and individuals. We have a dedicated Lien Unit that is well-versed in pragmatically addressing such matters.
Here are some key considerations:
- Negotiating a Payment Plan: Your business can negotiate a payment plan with the IRS to satisfy a lien. However, it’s important to note that the lien will remain in place until the balances are fully satisfied or a secured lien discharge is obtained. The terms of such a plan will depend on various factors and options available under the tax code.
- Avoiding Future Tax Liens: After addressing a tax lien, we provide financial planning and bookkeeping strategies to help businesses prevent future IRS tax issues, including liens, levies, seizure, or garnishments. Restructuring, as mentioned earlier, can be part of the process if deemed necessary and valid.
- Legal and Financial Implications of a Tax Lien: A tax lien can have significant implications, particularly for businesses with substantial assets or those seeking external funding. Tax liens are public records and can prevent the sale of assets held under the business’s EIN without remitting equity to address the debt. They can also impact funding opportunities until the lien is properly addressed.
- Continuing Business Operations with a Tax Lien: It’s important to differentiate between tax liens and tax levies. While a lien is an encumbrance that protects the IRS’s interests in the debt owed, a levy involves seizing funds from bank accounts and accounts receivable. A lien has minimal impact on businesses that are not actively selling assets or securing regular lending. For those that are, prompt payment or lien discharge is necessary. If a business is being levied, immediate representation is crucial to secure holds and negotiate the release of active levies.
- Challenging the Validity of a Tax Lien: Yes, businesses can challenge the validity of an IRS tax lien through the appeals process. This option is available when the business does not actually owe taxes for the period specified in the lien. The appeal is not to object to the filing of the lien itself but to dispute the underlying tax balance.
- Consequences of Ignoring a Tax Lien: Ignoring a tax lien can have severe consequences. As mentioned earlier, it can hinder asset sales and create issues with lending. If the lien is connected to an unresolved debt, the IRS may escalate enforcement actions, such as levies, garnishments, and seizures, with the intention of satisfying the debt or closing the entity. IRS debt should never be ignored, and strategies can be employed to negotiate while allowing collections statutes to expire.
- Working with the IRS to Resolve a Tax Lien Issue: Resolving a tax lien issue usually involves negotiations with a Revenue Officer. While the process can be complex and time-consuming, the goal is to prevent enforced collections, conduct a thorough financial analysis of the business, and negotiate the most viable agreement to address the debt over a designated period. Once out of the immediate enforcement scope, it may be possible to appeal certain penalties associated with the debt. In cases involving trust fund assessments against officers or board members, protection of both business and personal assets becomes a priority, requiring review and collation of personal financial information for proper identification and securing of protection measures.
- Collections Actions by the IRS for Unpaid Tax Liabilities: The IRS can take various collections actions against a business for unpaid tax liabilities, including liens, levies, garnishments, seizures, personal assessment of business debt, and even criminal prosecution. It’s essential to address tax liabilities promptly and work towards resolution to mitigate these potential consequences.
For more information on the Impact Of An IRS Tax Lien On A Business, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (720) 780-0501 today.