The letter from the state tax offices arrived today, and you have been given notice that a state tax lien has been placed against your holdings. This doesn’t have to mean the end of the world, as many people can find it’s easy to fall behind, and knowing what your lien means and how to resolve it is the first step in moving on with your life. It is recommended that you first contact a lawyer and a tax consultant who specialize in clients who have a state tax lien, and get professional assistance. Going through this process alone is simply not anywhere near in your best interest.
What is a State Tax Lien?
Due to unforeseen circumstances, it begins with a delinquency in paying past state taxes. The lien is a legal claim against your holdings, and results through negligence or failure to pay your state taxes. This lien protects the state’s interests in collecting this debt from you, and will attach to everything you own, including financial portfolio holdings, real estate under your control, and all personal property. A state tax lien will be filed only after a certain series of events first take place. First, the state will assess your liabilities to know exactly what is owed in back taxes. Second, the state will send a series of bills informing you of what you owe, including comprehensive interest payments and fees associated with the collection process. These can add up fast. Lastly, there must be an obvious negligence in failure to fully pay the debt in time. Once these have been met, the lien will be filed.
A notice of state tax lien will be made public, alerting any other creditors that the state lien takes precedence over any other debts attempting to be collected, with the exception of a federal tax lien. This situation always takes precedence.
How a State Tax Lien Affects You
The lien will be very thorough, reviewing and attaching itself to every single asset you have available that can be used in the collection process. Your assets will be cataloged and evaluated, including vehicles, financial securities, and property, whether personal or business related. All your credit will be frozen and limited to reduce the impact of paying off the lien. This also limits your ability to gain new lines of credit. Then, the state tax lien will attach itself to a broader range of assets, such as non-personal business holdings that you are personally attached to as a controlling agent. The tax default may be personal, nut all of your assets are fair game in paying the debt back.
Unfortunately, filing for bankruptcy will not discharge this debt, as a state tax lien will be in effect until the debt is cleared. Simply paying off what you owe is the only way to remove the lien. IN order to not have one in the first place, properly pay your taxes in a timely fashion.