What is IRS Tax Lien?

IRS Tax Lien is a legal government’s claim against your property when you neglect or fail to pay a tax debt. It is filed with your local county clerk office and protects the government’s interest in all your property, including real estate and financial assets. Once lien is filed, it becomes a matter of public record and routinely picked up by credit reporting bureaus, which affects your credit adversely.

Why does the IRS issue a tax lien?

The creation of a lien to satisfy a tax liability (known administratively as the issuance of a Notice of Federal Tax Lien) is the government’s action to encumber property in securing payment. It applies to all property and rights to property of the taxpayer.

A lien is issued only after the IRS first issues a Notice and Demand for Payment regarding taxes owed, and alerts creditors that the government now has a legal right to your property.

While a tax lien does not involve actual seizure of assets, its impact cannot be understated. Until the matter is satisfied, the lien is attached to all assets, including future assets, business assets and accounts receivable. Your credit will likely be adversely affected when agencies see the public Notice of Federal Tax Lien. Also, even if you file for bankruptcy, your tax debt remains in force … and usually, so does the lien.

What should I do if a tax lien is filed?

Pay off your IRS debt in full is the first option. If you can’t, consult a tax professional, such as an Enrolled Agent, who can reliably advise and help you implement a plan to best deal with the IRS … which can often include various options to reduce the impact of the debt.

What to expect...

When the IRS puts a lien on your assets, it is the equivalent of a public statement that you owe money to the United States government. The IRS may institute liens on your property once they have done the following: (1) determined that you owe unpaid taxes, (2) notified you, and (3) failed to receive payment from you. After these three events have taken place, you'll receive a notice in the mail informing you that the IRS has put a lien on your property.

IRS liens cover a wide variety of property, that includes your home, car, money in the bank, and other property you own or have right to such as your retirement or 401K. Because IRS liens cover so many things, they can be especially frightening. If you don't protect your assets, the IRS may take them from you or place a Federal Tax Lien against them.

If you don't take care of a Federal Tax Lien by paying the IRS what you owe in back taxes or settle your liability through an Offer in Compromise or other tax resolution option, you will have no success in getting a release of this lien.

IRS tax liens generally last until you have paid the IRS the money you owe them. While tax liens are not an aggressive tax collection method, they are upsetting and annoying, and they certainly affect your creditworthiness.

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