A tax lien means the government stakes its claim on all your properties since you haven’t been able to pay your taxes. While the IRS sends you a Notice and Demand for Payment outlining your dues, it also sends creditors a Notice of Federal Tax Lien. Credit bureaus take notice of tax liens, affecting your credit score and ability to finance future investments.
Apart from giving a bad reflection on credit scores and history, a tax lien unfortunately does not become expunged even after seven years, but can instead stay there indefinitely, even after declaring bankruptcy. The only way to get rid of it is to pay your dues to the IRS, which will release the lien after 30 days. However, not everyone has the luxury of paying their dues in full.
That’s why a second option exists which you can get with the help of a tax attorney: an offer-in-compromise (OIC). By assessing your financial health, the IRS can settle for a debt lower than the original to be paid either via lump sum or on a periodic basis. The IRS maintains an OIC Pre-Qualifier tool in their website, which asks a few questions and determines your eligibility based on your answers.
Those qualified will need to fill up a Forms 656 and 433-A (Form 433-B for businesses). An application fee of $186, in addition to the initial offer payment, may be waived if your income is 250 percent below the poverty line, qualifying you for Low Income Certification.