deal.
The second option is selling the home, which also has advantages. An intangible, yet important, benefit of the sale of a home to cover debts is the financial freedom that comes once the transaction is complete and the seller is debt-free. Of course, the seller will have to be able to make rental or other living arrangements. If this is done before severely damaging a seller’s credit rating — even if selling a home to clear debts — it’s still possible to purchase a new home. According to IRS guidance, if there’s a federal tax lien on your home, you must satisfy the lien before you can sell or refinance the home. There are several options to satisfy the tax lien. Until a few years ago, the IRS could impose a tax lien on an individual’s property, assets, or bank accounts for a debt as small as $5,000. That changed in 2011, however, when the agency announced that, because of the pressures of inflation and the struggling economy, it was increasing its limit to $10,000. If you owe less than this amount, the IRS will work out an overdue tax installment-payment plan with your tax attorney, but it’s not as if they’re going to forgive the debt: you still have to pay your taxes, or risk significant penalties — including jail time. At the same time as it increased its threshold for tax liens, the IRS instituted another policy that works to the taxpayer’s benefit. If you owe more than $10,000 in back taxes, for example, and end up with a lien on your house, you can ask the IRS to withdraw the lien once your bill is paid in full. This means the IRS will remove any trace of the lien from its public records, and the lien will no longer impact your credit. A lien is a red flag to credit agencies, which will drop your score by hundreds of points when the IRS tax debt is reported. The trick here is that you must actively file for an IRS withdrawal; if 115
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