Having Tax Liens Put On Your Assets Increases Your Risk of Bankruptcy

Having Tax Liens Put On Your Assets Increases Your Risk of Bankruptcy

The start of a New Year brings a clean slate but for some, but it can also bring new debt. When you file your income taxes you may end up owing the government money. If it’s more than you expected you may not have the money available to pay the debt. If you have tax debt that isn’t paid it can lead to a tax lien being put on your assets.

Tax liens can also happen if you go through an IRS audit. During an audit your tax history will be reviewed for the past 10 years. An audit is random but can also happen if there is some discrepancy with your filing history. If you don’t pay the taxes you owe each year and your tax debt builds then you are likely to get a tax lien.

A tax lien is an issue because you cannot sell or refinance your assets until the debt is paid off. You can sell your house and then pay off your tax debt at closing but it can complicate the selling process.

For some, bankruptcy may seem like the only solution to escape tax debts. Although it is possible to have tax debt discharged it requires special approval and it is not guaranteed. Student loans and back taxes are not always discharged through bankruptcy.

If you were to face foreclosure on a home with a tax lien your house would be sold and the income from the sale would go towards paying down your debts. If the profit does not cover you tax debt and your mortgage this can leave you responsible for the mortgage debt.

Once, famous performer Willie Nelson owed back taxes due to negligence on the part of his accountant who was not paying the necessary income taxes. Nelson’s assets had liens up on them and he opted to put the assets up for auction and used the money raised to pay off the tax debt.

Nelson’s tax issues were solved by creating a new album. The earnings from this album were enough to pay the back taxes and the liens were removed. Unfortunately the average person does not have this option available to them.

If you believe you may have a tax debt issue it is important to talk to tax lawyers as soon as possible. They can help you navigate the legal aspect of tax debts and they will work with you to create the best possible solution for your situation.