What Happens When A Tax Warrant Is Issued?

We’ve all heard too many horror stories about the IRS making it impossible to relax amidst even the smallest of tax problems. Yet, a tax warrant is a serious issue, and the amount of stress you’re feeling is pretty much justified. 

Luckily, there’s always a legal way to minimize its financial impact. 

Continue reading to learn about what happens when a tax warrant is issued and ultimately, what you can do about it.

What Is A Tax Warrant?

A tax warrant is a legal action started by the federal or state government against individuals who failed to pay their taxes. More commonly referred to as a lien, this type of warrant is a public record that allows government officials to claim your assets or personal property in order to recoup unpaid taxes. 

Any tax refunds in subsequent years will be applied to outstanding back taxes until the debt is paid in full.

Generally speaking, a tax warrant enters the scene right after the collection process starts and multiple tax bills are ignored. 

Here’s what happens when a tax warrant is issued - you’ll receive a Notice and Demand Payment from the IRS. This notice informs you that you are required to make necessary arrangements to pay off the amount in a lump sum or installments. If you fail to do so, the IRS will start collecting any assets you may have to settle the amount you owe.

What To Do After Receiving A Tax Warrant

Now that you know what happens when a tax warrant is issued, you can start thinking about resolving the problem at hand. 

First things first, evaluate whether the IRS's assessment of the debt is correct. If you don’t agree with the amount due, get in touch with a local IRS office. This stops the collection action and delays it until the government officials process the appeal, which might help you buy valuable time. 

Similarly, if you’re in the process of filing for bankruptcy, you should notify the IRS about this matter. Your debt may not be fully discharged, yet the bankruptcy court will take it into account. Moreover, the IRS will be forced to suspend any collection actions while bankruptcy proceedings are in effect. 

Next, in the event you’re simply unable to pay the full amount, contact a tax attorney for advice. With their assistance, you can negotiate a payment plan with the IRS. This alleviates the financial burden while also stopping the collections process.

As an alternative, you can also leverage the option called an offer in compromise. With this agreement, the IRS can settle your back taxes for the amount less than you owe. An offer in compromise doesn’t have a high approval rate, if you manageto demonstrate you have limited financial power and paying back the full amount would cause economic hardship, you might just get approved.

Lastly, requesting the IRS put down your account as currently not collectible is another option. Although this stops all collections from happening at the moment, your tax debt is still there -  you’re only putting off any collections since you’re unable to make any payments at the time.

Can You Get Rid Of A Tax Warrant?

Since you’re aware of what happens when a tax warrant is issued, you can safely conclude that getting rid of it is impossible. The only way to permanently remove a tax warrant is by paying the amount owed or by waiting out the statute of limitations, which is up to 20 years for state and ten years for federal taxes (such scenarios rarely happen). 

It is possible, however, to reduce the impact of the tax warrant on your finances. Some of these tax relief options include:

• Discharge of property - excludes some assets from the tax warrant
• Subordination - allows you to receive a loan 
• Withdrawal - removes the aforementioned loan without affecting the due amount

These options are only available if you already made arrangements with the IRS to pay off your liabilities and you owe less than $25k. Furthermore, your debt needs to be paid off within 60 months and you already must have made three direct payments under your installment agreement.

Does A Tax Warrant Impact Your Credit Score?

Since an IRS warrant is a public record associated with both your future and current assets, you’ll lose the ability to sell or refinance the said assets while the warrant is in effect. Along with this downside, an active warrant will significantly lower your credit score, which ultimately affects your financial abilities and may stop you from qualifying for a mortgage or a credit card. 

This is to be expected as creditors will perceive your debt to the IRS as a huge red flag and an indicator you are less likely to be able to pay off any additional debts.

What Happens If You’re Unable To Address Your Debts?

If you’re unable to resolve the issues swiftly, the IRS will put a levy on your assets to satisfy the debts. This may include seizing real estate property, removing money from your bank accounts, and even garnishing your wages - which employers and banks are legally obligated to comply with.

When your account reaches this stage, you’ll receive the so-called Final Notice of Intent to Levy, as well as a Notice of Your Right to a Hearing. If you haven’t by now, it’s a good time to hire a tax attorney as you’ll need someone to represent you at a hearing. 

Thankfully, you can get a release from a levy if the following conditions are met:

• You paid back the amount owed
• Statute of limitations has expired
• You’ll be able to pay a portion of the debt once the levy is released
• You’re unable to meet basic living expenses due to the levy
• Value of the property under the levy surpasses the amount of back taxes owed

Lessen The Burden Of Your Tax Warrant With The Law Offices Of Mary E. King

A tax warrant on your account is legitimately challenging, yet, don’t lose hope. It’s in no one’s best interest for you to experience hardships, not even the IRS itself. The fact of the matter is, there are legal options available to you that help minimize the financial burden of your tax debts.

With the guidance of experienced attorneys at the Law Offices of Mary E. King, you can explore the full range of possible options and find something that works for your current financial situation. 

We’ve helped many members of the Sarasota and Punta Gorda resolve their tax warrant amicably with the IRS, and without a doubt, we can help you too.

Use our contact form or dial 941-906-7585, describe your situation, and we’ll try to find the best solution for you.

Note: 

The information in this blog post is for reference only and not legal advice. As such, you should not make legal decisions based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.