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IRS Tax Lien Facts

October 21, 2010

By statute, your tax lien arises 10 days after the first notice is sent out. This means the tax lien already exists immediately after the tax debt is assessed.

Tax Lien Facts

  • The IRS does not consider a lien an enforcement action
  • Tax Liens secure creditor’s interest while you owe the IRS debt
  • The Lien can do little to hurt you if you have no equity on your property
  • Tax Liens have an effect on the client’s credit score
  • Tax Liens are highly effective, collecting millions annually for the IRS
  • Tax Liens will stay for the life of the debt with few exceptions

Action Steps to Remove a Tax Lien

  1. Many believe the IRS will take their home after they receive a lien notice. The IRS does not want to seize your house or even your assets. Their real priority is to work out a resolution for the tax debt.
  2. Tax Liens cannot easily be removed. In most cases, the Tax Lien will remain in place until the Tax Debt is paid in full. If the Tax Lien can be removed, the process can take 30-60 days. If you’re one of the lucky few without a Tax Lien, know that any debt over $10,000 (or $15,000 according to the IRS manual) is highly subject to having a lien filed. Be prepared for Tax Lien surprises if you owe the IRS.
  3. Ask yourself what the lien is preventing you from doing. Determine what problem the IRS Tax Lien is preventing. You may be trying to sell your home, move, or receive a promotion at work, but the Tax Lien is preventing this from happening. You need to know what the lien is preventing so you can stress urgency to the IRS and better choose which services are right for you.

Lien Subordination vs. Lien Discharge

Lien Subordination is when another lender gains priority over the Federal Tax Lien but the taxpayer still owns the property.

The IRS will usually allow subordination as long as you’re not physically making any money from the property. Remember, the lien is really a tool to secure the IRS’s money.

A Discharge occurs when property is being sold; the property is being removed from the lien for the new owner of the property.

Practical Effects of a Tax Lien

Tax Liens basically only affect your real estate and credit report. Tax Liens have little practical effect on buying and selling cars and other assets. Still, it’s important to work out a solution and tax advantage of the IRS programs and services as swiftly as possible so you can be compliant with the IRS.

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