Like most things related to tax debt and back taxes, tax liens are no fun. However, if you have a Maryland tax lien or are worried about one, ignoring the problem won’t help.
The good news is that whatever your tax problems, there’s always a way to start addressing them and improving your situation. Often, that path starts with learning about the issue and figuring out your options. In this article, we’ll try to help by explaining what Maryland tax liens are, how they work, and how you can avoid or get rid of them.
What Is a Tax Lien?
A lien is a claim against your property to satisfy the debt from unpaid taxes. When you get a tax lien, it means the government has a legal claim against your property, like your home or car, and can take that property if you don’t pay your taxes in full.
Just like there are state and federal taxes, there are state and federal tax liens. A federal tax lien will come from the IRS. If the agency determines you owe tax and demands payment, you’ll receive a federal tax lien unless you pay the tax debt in full. A Maryland tax lien works the same way, but it will occur because of unpaid state taxes and will come from the Comptroller of Maryland.
Imagine a tax lien as an octopus with a lot of tentacles: it can attach to all sorts of different assets you own, and it will stay latched on until you pay off your tax debt. A lien can attach to any assets: property, investments, vehicles, and anything else with monetary value. Liens can even attach to property that you acquire after the lien goes into effect.
In addition to affecting your property, tax liens can create other headaches. Since a lien will show up on your credit report, it may affect your ability to get loans, credit cards, and other forms of credit. Some employers perform credit checks on job applicants, so a lien could even hurt your chances when applying for a job.
Do Maryland State Tax Liens Expire?
You might wonder if you can just wait out a lien. For many years, Maryland state tax liens had no time limits. However, in 2019, Maryland Governor Larry Hogan signed a law that created a statute of limitations for certain tax liens. So, Maryland state tax liens can eventually expire, but the statute of limitations is very long: 20 years.
Even if two decades seems a long time, the new statute of limitations has a bright spot. Previously, the comptroller wasn’t very inclined to accept offers in compromise (OICs) since the state could potentially pursue a tax debt forever. Now, the state has a clock running against their claim for payment — even if that clock is a long one. The comptroller has some incentive to come to the table and negotiate in the hopes of getting some payment rather than none.
What Can I Do About a Maryland Tax Lien?
By now, you’re probably getting the picture on liens: they aren’t good, you don’t want one, and it’s in your best interest to resolve them as soon as you can. So, how can you avoid a Maryland tax lien or get rid of one?
What Not to Do if You Have a Maryland Tax Lien
Here are a few actions that won’t help with your lien situation:
- Selling the affected property: If you sell property that has a lien, the lien will stay with the property. Usually, an outstanding tax lien will make it difficult or impossible to sell the property unless you use the sale proceeds to pay the lien. As an example, let’s say you have a tax lien on your home and try to sell the home. When the buyer applies for a mortgage, they will find out about the lien (if they haven’t already), and at that point, they’ll most likely either back out of the sale or demand that you use the sale proceeds to pay the lien. So, selling property might help you pay the back taxes and satisfy the lien, but it won’t help you get out of taking responsibility for the lien.
- Filing for bankruptcy: Neither Chapter 7 nor Chapter 13 bankruptcy will eliminate tax liens. The liens will remain in effect after a bankruptcy filing and will continue until they’re paid off or otherwise released.
Understand Your Options for Resolving a Tax Lien
The only surefire way to get rid of your Maryland tax lien is to pay your tax debt in full. However, if you can’t pay your taxes, you may be able to negotiate to get your lien withdrawn or released. Also, you may be able to get your lien released by disputing the amount of tax owed. If you can prove that the IRS or the State of Maryland incorrectly calculated your income tax liability, then you can potentially get your lien reduced or withdrawn entirely.
But getting a lien released is a tricky process, and it’s far from automatic. The best way to address a tax lien is to get in touch with an experienced tax representative who can learn about your situation, explain your options, and guide you toward the solution that makes sense for you.
Need Help With a Tax Issue? Contact S.H. Block Tax Services
If you have any questions or concerns about an outstanding tax debt or any other tax matters, please contact the experienced tax team at S.H. Block Tax Services. Our skilled attorneys and tax experts have experience working with the IRS to resolve issues and protect taxpayers’ rights. We are based in Baltimore and serve clients throughout the area.
Schedule your free consultation today by calling 410-793-1231 or completing the brief contact form on this page.
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