{"id":353980,"date":"2022-08-19T07:44:43","date_gmt":"2022-08-19T12:44:43","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/tax\/federal-taxes\/what-is-a-tax-lien.html"},"modified":"2023-08-25T11:51:03","modified_gmt":"2023-08-25T16:51:03","slug":"what-is-a-tax-lien","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/federal-taxes\/what-is-a-tax-lien.html","title":{"rendered":"What Is a Tax Lien?"},"content":{"rendered":"\n
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What Is a Tax Lien?<\/h1>\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by J.P. Finet, J.D.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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Liens are a common way for lenders and other creditors to ensure they get paid back. For example, if you have a mortgage, a bank has a lien on your house, and a bank has a lien on your vehicle if you have an auto loan. <\/p>\n\n <\/div>\n\n

Much like other types of liens, a federal tax lien is simply a way that the Internal Revenue Service (IRS) ensures you don’t profit from the sale of your property until your back taxes are paid by filing a legal claim against the property. The federal government is not alone in using tax liens. State and local governments regularly use them when a taxpayer owes money, such as from failing to pay local property taxes.
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While filing a lien won’t force you to pay your tax debt, it might make it challenging to secure a loan, refinance your home, or get a credit card. However, it usually won’t appear on credit reports<\/a> or impact your credit score.<\/p>\r\n

What Is a Lien?<\/h2>\r\n

To understand tax liens, you need a general understanding of how they operate. A lien is a public notice giving a creditor<\/a> the legal right to seize specific property and sell it if you fail to make full payment of money owed or meet other obligations. A lien can be placed against real estate, personal property, bank accounts, financial assets, and other property. When a business owes money, a lien can be placed against business property, equipment, or accounts receivable.<\/p>\r\n

Most liens are filed with state or local governments, usually with the secretary of state or county recorder. Thus, liens are public records available so that potential buyers and lenders know the property is subject to an encumbrance.<\/p>\r\n

The IRS Lien Process<\/h2>\r\n

The IRS will not place a lien on your property if you simply fail to pay your income tax bill on time. The Internal Revenue Code<\/a> outlines specific steps in the IRS collection process<\/a> that the agency must follow if a taxpayer fails to pay the amount shown on their tax return:<\/p>\r\n

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  1. The IRS will assess a taxpayer’s debt if they fail to make a tax payment.<\/li>\r\n
  2. The IRS sends a "Notice and Demand for Payment" explaining the tax debt and telling the taxpayer they must pay it.<\/li>\r\n
  3. The IRS files a "Notice of Federal Tax Lien" that alerts the taxpayer and their creditors that the government has a legal interest in their assets.<\/li>\r\n<\/ol>\r\n

    What if You Still Don’t Pay?<\/h3>\r\n

    If you still don’t \u2014 or can’t \u2014 pay your tax liability after the IRS files a tax lien against you, the agency will issue a tax levy. A tax levy is when the IRS actually seizes your property and sells it to pay your tax debt. Once a levy has been issued, the IRS has several collection alternatives, including taking a taxpayer’s property and garnishing their wages.<\/p>\r\n

    Removing a Tax Lien<\/h2>\r\n

    The easiest way to remove a lien is to pay your tax bill. If that isn’t possible, there are still a few options available to reduce the impact of an IRS tax lien or remove it entirely. The IRS will allow taxpayers to utilize these options if it furthers the agency’s interest in getting the most money possible from the taxpayer. Taxpayers can:<\/p>\r\n