If you have a lien on your property or are in charge of a project, you’re definitely under a lot of stress. Financing may become challenging. It’s possible that the planned deal may fall through. Alternatively, the project manager may be breathing down your neck. In any case, you’re concerned about how to eliminate a lien.
You are not alone. When confronted with a lien, most general contractors and property owners seek explanations. After all, mechanical liens are powerful instruments with significant effects, so it’s better to be proactive in resolving the matter and getting the lien lifted.
What is a Tax Lien?
A tax lien is normally the IRS’s last choice for collecting taxes, but if it obtains one for your personal assets, such as your home, it might limit your ability to sell it. A tax lien, in essence, provides the IRS a legal claim on your assets if you fail to pay your tax burden. It is difficult to sell this sort of property since the IRS may usually enforce it against your buyer.
Why would you have a lien on your property?
The primary cause for a lien is that someone did not get payment for their services on a project. However, there are other reasons why this may occur, and how you approach eliminating the lien may depend on why it exists in the first place.
You forgot to pay the contractor
When you employ a contractor of any kind to perform on your property, you are committing to pay them for their services. If you fail to pay them for whatever reason, they have the authority to register a lien against your property. Whether you didn’t pay them because the job was poor or you couldn’t get financing, placing a lien is a legal prerogative in all 50 states.
The general contractor did not pay a subcontractor or supplier.
A project has a lot of moving pieces. Even minor tasks may require four or five subcontractors or trades to come in for various reasons. The general contractor is responsible for both hiring and paying these subcontractors. If the general contractor refuses to pay a subcontractor or supplier, they might flex their muscles and file a lien against the property. And here’s the kicker: it doesn’t
matter whether you’ve already paid the general contractor. If a lower-tier contract participant is not made whole, they have the ability to file a lien.
Nobody was aware of the existence of the subcontractor or supplier.
In an ideal world, everyone on a project appreciates and respects everyone other. The owner pays the general contractor, who then pays all of the subcontractors and suppliers. However, a notice of intent to lien appears a few months later. How is this even possible?
It is not uncommon for a subcontractor to hire their own subcontractors without informing the main contractor or project owner. They believe the crew doing the work is a subcontractor’s employee. How or why would the project owner and general contractor give that individual a check if they are unaware of their existence?
What should you do in this case?
Even if a tax lien exists on a property, there are still options available to you. Before proceeding with any further options, you should determine if the lien was properly obtained.
There are only a few methods to demonstrate this, but it is possible if the IRS did not follow the correct process if this is the case, you should file an appeal promptly using Form 9423.
In most circumstances, however, the tax lien will be valid. At this time, you can request that the IRS allow you to sell the property to pay off your tax burden. The IRS may accept this depending on the amount you owe and the value of the property. The owners can also dispute the lien right away or force them to foreclose sooner. In some states, owners can send a Notice to Foreclose which gives the contractor much less time than typical.
Remember, when you work with us, we’ll ask you simple questions about your life and assist you with filling out all of the necessary tax forms. Through us, you can be certain that your taxes will be done correctly, from basic to complex tax returns, regardless of your condition