What Is a Tax Lien?

If you owe taxes and fail to pay, the government can come after your money or property. A tax lien is a government claim against your property and assets. A lien gives the government a financial interest in your property, including your home, vehicle, and bank accounts.

If you get a notice of a federal, state, county, or local government tax lien, you need to respond, or you could lose your property. Talk to a tax lawyer who can review your case and explain your legal options.

What Is a Tax Lien?

A lien is a legal claim against a taxpayer’s property for unpaid taxes. A lien can come from a lender, creditor, or the government. A lien gives the lienholder a property right in your assets as collateral to pay for what you owe. If you don’t pay the debt, the lienholder may be able to seize the assets and sell them.

A lien attaches to real estate, personal property, and financial accounts. If you neglect your tax debt, the government could sell your property and use the sale proceeds to settle your delinquent taxes. If you are trying to sell your house, having a lien on the property will also make the transaction much more difficult, and most buyers will stay away.

There can be tax liens at different levels of government. A federal tax lien means you owe taxes to the Internal Revenue Service (IRS). A state tax lien is for unpaid state taxes. A property tax lien is for unpaid property taxes to your county or municipality.

Is a Tax Lien Different Than a Tax Levy?

A tax lien is different than a tax levy. A lien is a legal claim against the property. A lien secures payment of your tax debt. This is similar to a mortgage, where the lender has a claim to your specific property as collateral.

A tax levy is the seizure of the property or assets to pay the amount of the taxes owed. Once the IRS seizes property for the collection of taxes, they take it from the owner of the property. This is similar to an auto lender repossessing a car with an unpaid auto loan.

What Is the IRS Collection Process?

The IRS has a long collection process before they will issue a tax lien and then sell your real property by foreclosure. The IRS generally provides several notices and gives you multiple chances to pay your debts. For any unpaid taxes, the IRS will continue to assess interest and late payment penalties.

The IRS will issue a notice explaining your unpaid balance due and demand full payment. There are several options, including payment in full or entering into an installment agreement. If you ignore the notice, the IRS may issue a notice of seriously delinquent tax debt. This comes with passport restrictions, limiting your ability to travel.

If you don’t pay or ignore the notice, the IRS may file a Notice of Federal Tax Lien. This notifies your creditors and puts a legal claim on your property. The IRS generally won’t release the lien until you pay the full amount, including penalties and interest.

The IRS can then levy or seize your assets and property subject to the liens. This includes wages, bank accounts, and retirement income. A lien also attaches to business assets, including accounts receivable. The IRS can seize your property and sell it for payment of the taxes owed. If the IRS seizes or sells your property, you have a right of redemption. There is a 180-day redemption period.

For state, county, or local taxes, the procedures will be similar, but are likely to differ by your location.

How Can You Stop a Tax Lien?

There are several chances along the way to stop or remove a tax lien. As soon as you receive notice of a tax debt, you have several options, including:

• Pay the full amount of unpaid taxes
• Contact the IRS about a payment plan
• Dispute the tax liability

You may also qualify for an Offer in Compromise (OIC). An OIC is the only way to lower your tax liability. This is an agreement with the IRS to accept payment of a reduced amount to clear your tax debt. This is a limited option and depends on your ability to pay, expenses, assets, and income.

If there is already a tax lien on your property, you may be able to discharge the lien certificate. The IRS may withdraw the lien if you make a full payment to the tax collector.

Can a Tax Lawyer Help With a Tax Lien?

A tax attorney can represent you with state and federal income tax issues. If you have a tax lien, a tax lawyer can explain your legal options. A tax attorney can also negotiate with the IRS to try to lower your tax liability or come up with a payment plan. Talk to a local tax attorney for legal advice about your case as soon as possible.