Federal Tax Liens

Federal Tax Lien

A tax lien is a claim on property to satisfy a tax debt and is generally one of the first major steps IRS takes against both businesses and individuals in order to collect back taxes. A Tax Lien gives the IRS a legal claim to your property as security or payment for your tax debt. It is used in order to protect the government’s interest in your assets.

If you have unpaid back taxes and have not cooperated with the demands of the IRS to make the payments of the tax amount owed, it is likely that eventually you will receive a tax lien, which will then lead to a tax levy. By federal law, the IRS is given an automatic lien on a taxpayer’s property, including real, personal, tangible, intangible, and after-acquired, when the taxpayer is notified of a tax debt and the debt is not paid within ten days.

A tax lien makes it very difficult to get any credit to make additional large purchases, such as a boat, car, or house and can be financially crippling while one is in place. This means that purchasing assets on credit and holding them in your name is difficult if not impossible and you often have to rely on other people for financing (as lien is on your credit too). Creditors can be notified including your mortgage company, and the lien is a matter of public record for all to see.

Generally, a tax lien will stay in place as long as the IRS can legally enforce action against you (typically 10 years), or until your tax liabilities have been paid or settled with the IRS. The IRS becomes the highest of priority of creditors, so if you sold your house, car, or whatever property the lien was one and you had other liens on that property, the IRS would be the first to be paid.