Owe back taxes and think the IRS doesn't realize it? If you continue to ignore the problem, you will eventually end up with the IRS placing a Federal Tax Lien on your property, typically including your home.
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A Federal Tax Lien means that the IRS has the right to seize your property if you fail to pay your back taxes. The lien protects the government’s interest in your property, including real estate, personal property, and financial assets. The IRS assesses your tax liability and sends a Notice and Demand for Payment with the amount you owe.
If you do not pay it, the IRS files a Notice of Federal Tax Lien to alert your other creditors that the federal government has a legal first claim to your property.
The Notice of Federal Tax Lien is also sent to local government authorities, such as the Secretary of State or County Recorder in the county where you live or own property. The lien does not specify which property it affects. It automatically applies to all real and personal property and future assets you may acquire during the lien's existence.
State taxing authorities can also place a lien, but you need to research your state laws to determine how it’s used and the procedures for dealing with it. Some municipalities sell tax liens to investors. The investors pay the tax bill in return for the right to collect the money and interest from property owners.
As home prices continue to rise, so do property taxes. If you have a mortgage bundled with an escrow account to pay property taxes, make sure your lender sends proof of payment annually. If you own the home outright, don’t forget to pay the property tax yourself. Be sure to respond to any correspondence from the taxing authorities or state revenue agency about delinquent property taxes (or any other state or local taxes).
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Beyond the fact that the lien doesn’t let you sell your property, it has other effects on your life.
The IRS filing of the tax lien notice still tells creditors and lending institutions that the government has first dibs on your property.
A tax lien could make it challenging to get a loan or line of credit. Also, other entities like insurers and utilities might decide to adjust the rates they charge you. Tax liens aren't always removed automatically once you satisfy your tax debt. It can stay on your record for up to seven years unless you take steps to ensure removal.
Order credit reports from the three major credit agencies after the lien has been satisfied and follow up with the agency showing the lien. Use their procedure for disputing the report and requesting changes.
A tax lien attaches to all business property and all rights to business property. The lien even applies to your accounts receivable. If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue afterward. Bankruptcy doesn’t always get rid of it.
If you try to sell or refinance your home, the tax lien will surface during the title search. A lien can make it difficult to sell your home or receive a favorable interest rate for refinancing. Also, you will need to use any equity you have in your home to pay down your tax liability due to the lien.
If you do not address or resolve your tax debt issues, a tax lien may end in a tax levy.
>>Click Here to Learn How Tax Liens Affect Your Credit
The only sure way to get a tax lien released is by paying off your tax bill, including interest and penalties. It's the only way to ensure the IRS doesn't seize your property. Once the taxes are paid in full, the IRS has 30 days to release the lien.
If you can’t pay in full right away, notify the IRS and file an extension. You will have six months to get the money together. If you know that you cannot pay the debt in six months, you can negotiate a payment plan. The IRS offers installment plans and partial payment options for those who don’t have the entire amount ready to pay.
Remember that as long as you have an unpaid balance, it will accrue interest and penalties until wholly paid.
There are also other methods of releasing a lien.
The Offer in Compromise program allows you to pay a portion of your tax bill, and the IRS calls it good. You must be up to date on all tax filings for all previous years and current on your tax filing and estimated tax payments for this year.
You cannot get an Offer in Compromise if you are in bankruptcy proceedings or under an audit. If you receive an Offer in Compromise, the IRS issues a lien release, not a lien withdrawal.
>>Click Here to Learn How to Make an Offer the IRS Will Accept
You can appeal your federal tax lien.
One step you can take is to ask for a CAP hearing from the IRS Office of Appeals to have the levy or lien reviewed. You can request a due process hearing as soon as you receive a lien notice.
If you disagree with the decision of the IRS employee you consulted, you can ask for a conference with the employee's manager and ask the Office of Appeals to review the case.
You have a limited time to appeal, so you need to move quickly.
If your appeal request is denied, you can request a judicial review from the U.S. Tax Court. The petition must come within 30 days of the date the Appeals Office issues a determination letter.
If you miss the 30-day window for filing an appeal, you can file a request for an Equivalent Hearing using Form 12153. Still, it won't block a tax levy, suspend the 10-year statute of limitations, or allow you to go to court to appeal any decision by the IRS Office of Appeals.
An Equivalent Hearing must be requested within one year plus five business days after the Notice of Federal Tax Lien.
You can try appealing the lien using one of the following justifications:
The IRS may be persuaded to release the tax lien if it would speed up collections or be in the best interest of both parties.
>>Click Here to Learn How to Appeal a Tax Lien
Subordination doesn’t remove a lien. Instead, it allows other creditors in front of the IRS to receive payment. Subordination can make it easier to get a loan that you can use to pay your tax debt. Or a creditor may make the argument that satisfying the debt owed them should happen first. Maybe the IRS agrees.
Determine your eligibility for subordination using Publication 794 Instructions on How to Apply for a Certificate of Subordination of a Federal Tax Lien. Most subordinations occur when the IRS places a lien against a property with a significant and clearly defined value, like a home or specific business.
The IRS may determine that it’s easier or quicker to collect from you once the creditor has sold the asset and agreed to a subordination.
>>Click Here to Learn How to Get a Certificate of Subordination
A withdrawal removes the public Notice of Federal Tax Lien, assuring that the IRS is not competing with other creditors for your property. You are still responsible for the tax debt in full.
Use Form 12277 Application for the Withdrawal of File Form 668Y, Notice of Federal Tax Lien. The IRS issues Form 10916(c) as proof the tax issue was resolved.
The Fresh Start Initiative, beginning in 2011, offers two additional options.
Withdrawal is only available if you owe $25,000 or less in taxes, interest, and penalties. If your balance is higher, you must pay it down to $25,000 to be allowed a withdrawal. Also, your Direct Debit installment agreement must pay your balance in full within 60 months or before the Collection Statute expires, whichever is earlier.
You must make three consecutive direct debit payments, fully comply with other filing and payment requirements, and cannot default on your current or previous Direct Debit installment agreements.
>>Click Here to Learn About Tax Lien Releases and Withdrawals
A discharge of property removes the lien from a specific property so you can sell it without problems. The expectation is that you use the proceeds to pay down your tax debt. Several Internal Revenue Codes determine your eligibility.
See Publication 783 Instructions on How to Apply for Certificate of Discharge from Federal Tax Lien.
>>Click Here to How to Get a Certificate of Discharge
A tax lien secures the government’s interest in your property for non-payment of tax debt.
A tax levy allows the government to seize the property to pay your tax debt.
If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize, and sell any real or personal property you own or have an interest in. Levies include wage garnishments and bank freezes, as well as property seizures.
>>Click Here to Read About How a Tax Lien and a Tax Levy Differ
Avoiding a tax lien is simple...pay your taxes in full and on time.
If you cannot file or pay on time, do not ignore any letters or correspondence from the IRS. Always, always, always respond to these letters. Payment options are available to help you settle your tax debt over time.
>>Click Here to Read About How to Avoid Tax Liens
If you have a Federal Tax Lien on your property, or are in danger of receiving one, you need the experienced professionals at Top Tax Defenders on your side. Top Tax Defenders takes fighting for our clients seriously, and offers a firm with experience:
>>Click Here to Read Real-Life Success Stories from Our Clients
A federal tax lien is the government's legal claim against your property when you fail to pay a tax debt. It attaches to all assets... real estate, personal property, and financial accounts, which includes future assets acquired while the lien is active. The IRS files a public Notice of Federal Tax Lien to alert creditors that the government has first priority over your property.
The IRS first sends a Notice and Demand for Payment. If you don't pay, it files a Notice of Federal Tax Lien with your local County Recorder or Secretary of State. This public filing alerts banks and creditors that the federal government has legal priority over your assets ahead of them.
A federal tax lien lasts 10 years from the date the tax was assessed. It can be extended if the IRS refiles before expiration or if bankruptcy tolls the statute. Even after the debt is paid, the lien can remain on your credit report for up to seven years.
A tax lien makes it harder to get loans, mortgages, or lines of credit because lenders see the IRS as a senior creditor. It blocks the sale or refinancing of your home, attaches to all business assets including accounts receivable, and can remain on your credit report for up to seven years.
A tax lien is the government's legal claim against your property. It establishes priority but doesn't take anything immediately. A tax levy is the actual seizure of property to satisfy the debt, including wage garnishment, bank freezes, and asset seizure. An unresolved lien can escalate to a levy.
Not easily. A lien surfaces during the title search and prevents transferring clear title to a buyer. However, you can apply for a Certificate of Discharge of Property, which removes the lien from that specific asset so the sale can proceed, with proceeds expected to go toward your tax debt.
There are five main options: pay the debt in full (lien released within 30 days); settle via an Offer in Compromise; request a lien withdrawal under the IRS Fresh Start Initiative if you owe $25,000 or less; apply for a discharge of property to free a specific asset; or appeal if the lien was filed in error.
A lien release confirms the debt is resolved but the public record may remain. A withdrawal removes the Notice of Federal Tax Lien from public record entirely. It is as if it never existed, which is better for your credit. Withdrawal is available under the Fresh Start Initiative for taxpayers who owe $25,000 or less.
The IRS Fresh Start Initiative expanded options for resolving tax liens. Qualifying taxpayers who owe $25,000 or less can request a full lien withdrawal by entering a Direct Debit installment agreement, making three consecutive on-time payments, and staying compliant with all filing requirements. The program also broadened eligibility for Offer in Compromise settlements.
It is significantly harder. Most lenders won't extend credit when the IRS holds a senior claim on your assets. One option is lien subordination, where the IRS agrees to let another creditor be paid first, making a loan possible. Loan proceeds can then be used to pay down the tax debt.
Yes. You have 30 days from the lien filing date to request a Collection Due Process hearing with the IRS Office of Appeals. Valid grounds include: the debt was already paid, the lien was filed during bankruptcy, the 10-year statute of limitations has expired, or the lien was filed due to a processing error.
You can pursue lien removal on your own, but a tax attorney, enrolled agent, or CPA significantly improves your chances. Lien removal involves strict deadlines, complex IRS forms, and negotiation. A professional can identify every option available to you including appeals, Offers in Compromise, Fresh Start, subordination, and advocate directly with the IRS.
