statute of limitations irs tax liens

Is There a Statute of Limitations on IRS Tax Liens?

Whether you owe a few hundred dollars or hundreds of thousands, tax debt can be extremely stressful and have serious adverse effects on your personal and professional life, especially when it leads to a tax lien. Thankfully, there are many ways to reduce or even eliminate your tax debt entirely—one of which is to allow the statute of limitations on your tax liability to elapse.

In this blog, we’re going to discuss the statute of limitations on IRS and Maryland tax liens, as well as how you can eliminate these liens before these deadlines expire.

What Is a Tax Lien?

If you fail to pay your state or federal taxes, the government is within its rights to impose a legal claim against your property and financial assets. This is known as a tax lien. A tax lien makes it nearly impossible to sell your property and extremely difficult to make new purchases.

In order for the government to place a lien on your property, it must first assess your liability and then send a Notice and Demand for Payment. If you are unable to pay the amount in full or come to some sort of payment agreement, you will then receive a Notice of Lien.

If you can pay your tax debt, the IRS will release your lien within 30 days. If you’re unable to pay in full, you could be eligible for certain programs to minimize the effects of the lien:

  • Discharge of Property: You could be eligible to remove the lien from certain types of properties after making agreed-upon payments.
  • Subordination: Being subject to a lien can significantly damage your credit, making it difficult to receive a loan. Throughout subordination, however, other creditors can replace the IRS as the primary creditors on your loans, which could make it easier to get a loan or home mortgage.
  • Withdrawal: A withdrawal removes your lien from public record, which means other creditors are eligible for your property. You can receive a withdrawal by paying your tax debt in full or by entering into a direct deposit Installment Agreement (if you owe less than $25,000). Please note that a lien withdrawal doesn’t actually remove the lien; only a lien release can do that. To have your request for a withdrawal accepted, you will need to be able to argue convincingly that withdrawing the lien will make it easier for you to pay your debt.

What Are the Statutes of Limitations for IRS and Maryland Tax Liens?

Federal taxes have a collection statute expiration date (CSED) of 10 years following the tax assessment noting the liability, which is the date the IRS sends you your first bill for your tax debt. If you have not filed a return, then your statute of limitations does not begin until you do, so there’s no sense delaying the inevitable.

This period can extend beyond 10 years if the statute is suspended by bankruptcy or while you live outside the United States for six or more consecutive months. The collection statute can also be suspended while the IRS considers an Installment Agreement, Offer in Compromise, or Request for Spousal Relief. In rare instances, the IRS could seek to extend the 10-year statute of limitations by suing you in federal court, but they only do this in extreme circumstances and are not always successful.

Unfortunately, in Maryland, there is no statute of limitations on a tax debt or tax lien, which means you will have to achieve a zero balance to have your lien(s) removed. Thankfully, there are several proven strategies you can take to resolve your tax debt and regain control of your financial future.

Related Content: How to Avoid a Maryland State Tax Lien

How to Remove a Tax Lien Before the Statute of Limitations Expires

You can’t sit back with your fingers crossed hoping the IRS tax collection statute of limitations expires. The government is notorious for its aggressive collection tactics, which will only increase once you begin nearing that 10-year CSED. Instead, you should consider one of these methods to resolve your tax debt and release your tax lien.

  • Installment Agreement: Arranging an installment agreement with the IRS can help you eliminate your debt more quickly and for less money. It can also help you achieve a tax lien withdrawal. Unfortunately, you will likely have to waive the 10-year statute of limitations, but if the agreement amount is favorable, then it’s well worth it.
  • Offer in Compromise: Taxpayers who owe more than $10,000 could be eligible to significantly reduce their tax liability through the IRS’ “Offer in Compromise” program, which is designed for individuals with major tax debt who are simply unable to resolve the entire amount owed. The IRS would rather recover some of that debt than none of it (should the collection period elapse), so a good tax professional should be able to help you achieve a fair settlement.
  • Currently Not-Collectable Hardship: A tax professional can request that the IRS stop all collection processes (including tax liens) by entering you into “Currently Non-Collectable Status.” You will still owe your back taxes and be required to pay, but the IRS will cease their collection efforts and remove any liens or levies against your property and income.

The methods above are effective but can be difficult to achieve, which is where a skilled and experienced tax attorney can make all the difference.

Related Content: How Does the IRS Decide What I Can Afford to Pay?

Your Tax Lien With S.H. Block Tax Services

At S.H. Block Tax Services, we have decades of experience helping taxpayers in Maryland and throughout the U.S. eliminate or minimize the effects of their tax liens. Our firm focuses exclusively on tax law, so we know what it takes to get the job done and get you back on the right path.

Please call (410) 872-8376 or complete this brief form today to schedule your free consultation with one of our skilled tax attorneys.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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