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Tax Warrant: What it is and The Impact on Credit Report

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No one likes getting a letter in the mail from the IRS, and it can be especially concerning when you don’t understand what the letter is about.

One common letter from the IRS is called a “tax warrant.” But what is a tax warrant, and what should you do if you receive one?

Can the IRS issue warrants? Yes, When the IRS issues a tax warrant, it is serious business. It means that the tax agency has determined that you have not paid your taxes and are now subject to criminal penalties.

A tax warrant gives the IRS the authority to take enforcement action against you, including seizing your assets and arresting you.

More: Understanding if You Can Have Two Installment Agreements with the IRS

This article will explain what a tax warrant is and provide guidance on how to respond if you receive one.

What is a Tax Warrant

A tax warrant meaning is an order from a government authority directing a third party to withhold money owed to the government by the specified person or company.

The tax warrant usually cites the amount of tax owed and can be for past or present taxes. A tax warrant can also be used as a collection tool if other means of collecting the debt have been unsuccessful.

How Does a Tax Warrant Work?

A bill from the IRS is sent to you if you file your taxes, commonly known as a Notice and Demand for Payment.

If you don’t make arrangements to pay the outstanding tax amount, whether as a lump sum or via an installment agreement, the IRS will employ various tactics to collect it.

A tax warrant generally occurs toward the end of the IRS collection process. The following is a typical timeline for this procedure:

  • You did not pay your first bill, you will be sent one additional tax notice.
  • If you ignore the second bill, collection efforts will begin.
  • If you get tax refunds in later years, they will be applied to your outstanding back taxes until the debt is completely paid off.

Contact your local IRS office immediately if you don’t agree with the amount of assessed taxes. Collections enforcement will be delayed until your appeal is processed.

If you are already filing for bankruptcy, you should contact the IRS right now. Although your debt will not be forgiven, the bankruptcy court will consider it.

Note: During bankruptcy proceedings, collection actions will be halted.

How to Handle a Tax Warrant if I Can’t Pay My Taxes?

If you are unable to pay the amount owing, you may enter into a payment arrangement. If you make an honest effort to pay as agreed in installments, you will not be subjected to IRS collection actions.

An offer in compromise is another option. In this case, the IRS will agree to settle your back taxes for less than you owe in order to avoid a bigger fine and/or interest accrual.

This is rarely granted, but it’s an option if you can show that you don’t have the assets or income to pay off the overdue taxes and that paying the whole amount would be excessively difficult.

You may also ask the IRS to categorize your account as one that is no longer collectible (CNC). This implies you are unable to make any payments right now. However, this does not guarantee that you will be issued a tax warrant.

Note: You have the right to appeal the IRS Appeals Board’s decision. If you receive notification of a lien or levy, this is especially crucial.

How Can I Remove a Tax Warrant?

The only effective techniques to get rid of a tax lien are to pay the taxes owed in full or outlast the statute of limitations for the debt to be collected, which is generally 10 years for federal taxes and up to 20 years for state taxes (depending on the state).

How soon can you be debt free?

However, you may take steps to minimize the effect of the lien on your finances. You may consider the following options based on your specific circumstances:

  • Discharge of property, which removes the lien from certain assets only
  • Subordination, which may make it easier for you to qualify for a loan or line of credit
  • Withdrawal, in which the loan is removed, but you are still responsible for paying the past-due amount

In general, you must meet the following criteria to qualify for these options:

  • You have made arrangements to pay your tax liability.
  • You owe less than $25,000.
  • Your debt will be paid off within 60 months under your installment agreement.
  • You have made at least three direct debit payments under your installment agreement.
  • You have not defaulted on any previous installment agreement.

What Is the Impact of a Tax Warrant on Credit Report?

A tax warrant is a public document that is linked to all of your present and future assets. You won’t be able to sell or refinance these goods until the lien is removed.

If you don’t try to pay your back taxes with the IRS, the government can seize your property to satisfy the debt. This might include your house, car, and/or financial assets.

A lien on your record will lower your credit score. This can prevent you from being eligible for a mortgage, auto loan, or credit card.

When creditors learn that you owe money to the IRS but are unable to pay, they will be cautious about your ability to repay a future loan.

Need Help with a Tax Warrant?

You will obtain documents referred to as “Final Notice of Intent to Levy” and “Notice of Your Right to a Hearing” when your account reaches this point in the collection process.

It’s critical to retain the services of a qualified tax lawyer who can assist you with the IRS.

Call now. You have the right to request an immediate levy release.