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What Does it Mean to Have a State Tax Lien?

person checking tax papers

Whether you’re an individual or a corporation, there’s no way of avoiding taxes. One way or another, Uncle Same gets paid, or you pay some extra pennies.

What’s worse? You earn yourself a state tax lien.

Paying your taxes on time helps you eliminate tax deadline stress. Waiting until the last minute puts your refund at risk; if you normally receive one. You also avoid added interest and other financial penalties.

Better yet, you keep the government from taking possession of anything you own.

What is a state tax lien? Is it bad for your financial health? Read on as we take a deep dive into state tax liens and their effects.

What is a State Tax Lien?

Every year the government sets a universal deadline for all tax bills—individual and corporate. When you fail to meet that deadline, the government files a legal claim to your property.

That legal claim is formally referred to as a state tax lien.

Property subject to a state tax lien includes personal property, real estate, and financial assets. After a lien gets issued, it’s recorded in the county records where you live.

Afterward, you can search for tax liens to find out how to remedy the responsibility. If the tax remains unpaid, the tax authority can use it to legally confiscate the taxpayer’s assets in order to collect the amount owed.

Even if a debtor receives a claim in government interest or property, a tax-charged government allows the government to seize and sell the property.

Tax liens are publicly recorded. After a taxpayer pays the debt, the county’s record will be updated to reflect the fact that the claimant has been released.

Avoiding a Lien

The government leaves the responsibility of paying tax bills on time up to the individual. To avoid a tax lien, pay your tax bill in full on time.

If you can’t pay the bill, communicate with the department of revenue. Notify them of your hardship. Ask if you can take advantage of any available payment options.

paper of tax lien

They might be able to enter the debt into an affordable payment plan. Keep in mind that a payment plan won’t stop the lien from getting recorded in country records. It will, however, help you avoid additional penalties.

How a Lien Affects your Credibility

A lien is more than an oops. It affects your present and future financial situation. Here’s how a lien affects your credibility:

  • A lien attaches to any and all assets you acquire for as long as it’s active.
  • Having a lien might force you to file bankruptcy. Bankruptcy is one of the only ways to eliminate a lien, other than paying it in full.

Make moves to get rid of your lien as soon as possible.

How to Get a Lien Off your Records

There are a few steps you need to take to get a lien off your records. First, start requesting a copy of the lien. Contact your state tax office and ask for a formal balance payoff letter.

The payoff letter includes the entire balance needed to pay the lien in full. Pay the debt in full.

Afterward, request copies of your credit reports to verify the balance. In 2018, the three major credit bureaus removed all tax lien. If your credit report still reports a lien, send a letter to the credit bureaus requesting its removal.

The credit bureaus take up to 30 days to remove the lien.

Take Care of your Lien

A state tax lien is a serious matter. Stop neglecting your tax responsibility and get your life back. Pay the lien.

What Does it Mean to Have a State Tax Lien?

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