IRS Tax Liens: Your Questions Answered

What is a Tax Lien?

A tax lien is the IRS’s legal claim against your property when you neglect or fail to pay a tax debt. It doesn’t mean the IRS has taken your property; rather, it establishes the government’s interest in your assets as security for the debt.

Once a lien is in place, it generally attaches to all property you currently own and may acquire in the future, including:

• Real estate (your home or other property)
• Personal property (vehicles, valuables)
• Financial assets (bank accounts, investments)

A federal tax lien typically arises after the IRS:

1. Assesses your tax liability
2. Sends you a bill (Notice and Demand for Payment)
3. You fail to pay the amount due

In many cases, the IRS may also file a Notice of Federal Tax Lien (NFTL) in public records to alert creditors that it has a legal claim against your property.

How is a Tax Lien Different From a Tax Levy?

Although the terms are often used together, tax liens and tax levies are very different IRS collection tools.

• A tax lien is a legal claim that protects the government’s interest in your property. It establishes priority over other creditors but does not involve taking your assets.
• A tax levy, on the other hand, is the actual seizure of property to satisfy a tax debt. This can include garnishing wages, levying bank accounts, or seizing and selling assets.

Think of it this way:

• A lien is a warning and a legal placeholder.
• A levy is enforcement and collection.

A lien often comes before a levy, and addressing a lien early may help prevent more aggressive IRS actions.

How Can I Find Out If the IRS Has Filed a Lien Against Me?

If you suspect the IRS may have filed a tax lien, it’s important to confirm it as soon as possible. Here are the most reliable ways to check:

1. Call the IRS Centralized Lien Unit at 800-913-6050.
2. Visit your county’s Clerk of Courts website and conduct a title search.
3. Contact a tax professional.

A tax professional can not only find out if there is a lien in place, but also work with you to find affordable solutions for taking care of your tax debt.

Will a Tax Lien Affect My Credit Rating?

Technically, no. Tax liens are no longer included on your credit report, but they are public record. Although they do not impact your credit score directly, they can make it difficult to secure mortgages and other types of loans. A tax lien may also prevent you from obtaining certain jobs that require higher levels of security clearance, as well.

What Are The Best Ways to Avoid an IRS Lien?

The best way to deal with a tax lien is to prevent one from being filed in the first place. Here are practical, proactive steps you can take to reduce your risk:

Steps to Steer Clear of an IRS Tax Lien

1. File Your Tax Returns on Time
   Even if you can’t afford to pay what you owe, filing on time helps you avoid additional penalties and shows the IRS you’re making an effort to comply.
2. Pay Your Tax Balance Promptly (If Possible)
   Paying your tax bill in full by the deadline prevents a lien from arising altogether.
3. Set Up a Payment Plan Early
   If you can’t pay in full, applying for an IRS installment agreement may stop the IRS from filing a lien, especially for smaller balances.
4. Respond Quickly to IRS Notices
   Ignoring IRS correspondence increases the likelihood of enforced collection actions, including liens.
5. Explore Tax Relief Options
   Depending on your financial situation, options such as an Offer in Compromise, Currently Not Collectible status, or penalty abatement may help resolve your debt before a lien is filed.
6. Work With a Tax Resolution Professional
   Professional representation can help ensure deadlines are met, negotiations are handled correctly, and your rights are protected throughout the process.

Being proactive and informed is the most effective way to avoid the complications that come with an IRS tax lien.

How Do I Remove an IRS Lien?

Once a tax lien is in place, it will generally stay there until you pay the tax debt in full or the statute of limitations runs out. Under certain circumstances, however, the IRS may release, withdraw, or discharge a lien.

A release of a federal tax lien means that the IRS has cleared both the lien for your tax debt and the public notice. This generally happens when one of the following occurs:

• You paid your tax debt in full.
• Payment of your taxes is guaranteed by a bond.
• The IRS accepted your Offer in Compromise, and you met the payment terms.
• The statute of limitations for collecting the debt has expired.

A withdrawal, on the other hand, is like the lien never existed. This is done for only a few reasons and rarely occurs. If you owe less than $25,000 and enter into a direct debit payment plan for 72 months, however, you may request a lien withdrawal after the third payment clears.

You may also be able to remove specific property from a tax lien through a discharge. The IRS may grant a discharge when:

• The property in question is worthless.
• You agree to sell the property and place the proceeds in escrow.
• A third party provides a bond or deposit equal to the IRS lien interest.

A discharge may also be granted if you pay an amount equal to the interest in the property.

Need Help With an IRS Tax Lien?

If you’re behind on paying your taxes and worried that an IRS tax lien is imminent, get help immediately. At Tax Defense Network, our experienced tax professionals can help you find an affordable solution for handling your tax debt and help you avoid potential liens. In certain situations, we may also be able to assist with having your lien withdrawn or released. Call 855-476-6920 to schedule a free consultation and explore your options today!