Tax Lien: What It Is and How to Stop A Tax Lien

Get a Free Consultation by one of our Tax Professionals

Click Here To Get Started

Safe. Secure. Confidential. No Obligation.

tax lien

What is a tax lien?

A tax lien is a legal claim against assets in order to guarantee that a commitment is fulfilled for example clearing a debt.

When the IRS decides that you have unpaid federal taxes, it may bring out a Tax Lien against you. If you have not paid an outstanding amount of tax annually each April, you can expect this process to begin pretty swiftly. This includes the amount that you are alleged to owe, as well as any additional costs, penalties and interests that have accrued. A tax lien means that:

  • The government has a legal claim to your property to resolve an outstanding debt
  • It can be enforced against an individual, or a business
  • Your property cannot automatically be seized – but the lien means that taxation authorities get first rights to your property over any other creditors you may have (including the bank if you owe a mortgage)
  • The tax lien will stay in place until such time as you have paid off the full amount owed plus any additional charges and interest, or the statute of limitations expires on the debt
  • If you meet the requirements of the IRS Fresh Start Initiative, you may be able to have the Lien removed


Could not recommend Clean Slate Tax more for my tax relief! Highly knowledgeable and professional. They helped in a very difficult situation and handled it perfectly. Fees are reasonable and totally worth it.

Julie Mccarthy – 08/03/2020

How Do I Stop A Tax Lien?

The first course of action is to ensure that all taxes are up to date and filed on time. If you are aware of an upcoming tax bill that you know you won’t be able to pay, it’s a much better idea to speak to the IRS in advance. They will be able to work out a repayment plan with you. This will not only give you some financial breathing space, but it can prevent you having to live without some of the severe restrictions that a Tax Lien places on your life. The act of enrolling in a payment plan signals that you are making an effort to repay what you owe, and can help to stop a dreaded Tax Levy happening, where assets are seized and sold off. This process can be hugely distressing, so it’s far better to avoid it by any means. It’s wiser to avoid the risk by making sure that your tax affairs are in order, entrusting a reputable firm, and checking that you are having enough tax deducted from your paycheck each month to cover your expected tax bill. The IRS will usually catch up with people quite quickly and if this is the case, you are going to end up owing far more than just the initial amount. So it really is better to work with the IRS on a payment plan than to have things escalate to the level of receiving a Tax Lien.

Avoiding A Tax Lien – What You Need To Do

As much as we may sometimes resent paying them, taxes are an inevitable part of life, and if you do not pay them, the result is unavoidable tax debt. This is a stressful situation to deal with and can severely impact your quality of life. A lot of people unfortunately go through this process – the IRS estimates that 10 million people each year end up facing tax penalties. If you get into this situation, the best course of action is to resolve matters as fast as you can, and the support and guidance of a professional tax firm is really important to get it all resolved.

Receiving notification of a Tax Lien can be a stressful experience. But how does it actually affect your daily life and finances? To receive a Tax Lien is a very serious experience that will impact your life.

  • You may not be able to get credit. Although a Tax Lien no longer appears on your Credit Report like it used to, the IRS can still file a public notice which may creditors will search for when processing a new credit application
  • It applies not only to the assets that you already own – things like property, cars, stocks and shares – but also to any that you acquire while the lien is in effect
  • Your business property and accounts are also liable
  • If you’re going through a home sale or a remortgaging process this could be jeopardized. The details of your Tax Lien are likely to come up during the title searches, and any equity that you have in the property will have to be out towards paying off the debt in order to close the sale.
  • If you are in the process of filing for bankruptcy, be aware that this process does not automatically invalidate the effect of the lien. You may well still be responsible for your remaining tax debt even after being declared insolvent.
  • You may find that an outstanding tax lien also affects your ability to get a job as a lot of employers will not take on new staff with federal judgements
  • You may find that you no longer have security clearance to leave the country, so your travel plans are likely to be restricted.
  • Your time will be swallowed up, as dealing with an outstanding Tax Lien can be complicated on your own. Overdue taxpayers are often put into an automated collections process. This can mean hours on hold with call centers or even dealing with in-person visits from collections agencies who may have been assigned to your case.
  • If you are not able to resolve your Tax Lien quickly, the situation might escalate to a Tax Levy, which is something else you need to deal with and has a more serious impact.
  • If the situation is not resolved at all, it can lead to you facing criminal charges which will severely impact your life

Professional guidance from an experienced and appropriately qualified tax firm will be needed to guide you through the process. It’s very important to resolve your tax lien as quickly as possible, because interest and other charges continue to accrue while the case is ongoing, which means the final amount owed is getting higher all the time. So, how can you resolve the case quickly?

  • Immediate payment of all owed amounts including interest and additional charges
  • Filing an ‘Offer In Compromise’. This may allow you to settle your tax debt with the IRS for less than the total amount owed. It can be an option if you either cannot pay your full liability due to reduced circumstances, or if paying them would constitute a significant financial hardship
  • Arrangement of an Installment Agreement, which is a plan to pay back the owed amount over a period of time
  • Qualifying for the IRS Fresh Start Program if you meet the requirements
  • Discharging Property – If you can obtain a Certificate of Discharge you may be able sell property free of the lien
  • Subordination – This is an application which allows other creditors to move ahead of the IRS in the queue for repayment, such as when a mortgage or a loan is critical. It does not remove the lien.
  • Withdrawal – Removal of the public notice that assures the IRS is not competing with other creditors for the rights to your property

There are lots of options to consider, and it can be a little overwhelming. That’s why the expert guidance of a firm like Clean Slate Tax can really help you to resolve matters to your best advantage. Once your Tax Lien is paid off in full, the IRS will release it’s hold on your accounts and properties within 30 days.

Many people wonder what really happens when a Tax Lien is declared. The timeline of events is individual in each case, as it’s affected by your personal circumstances. However, there are some fixed points which will apply to your case.

  • Penalties and accrual of interest are dated to start immediately. This means that if you have not paid your tax bill in full by April 15th, the IRS will start to charge interest on whatever amount you owe from this point onwards.
  • The APR (Annual Percentage Rate) of interest paid on your debt is usually 5% or 6%
  • The IRS may also change a late payment fee. This is 0.5% of the outstanding amount per month, to a maximum of 25% of the total owed.
  • Within 3 months, you are likely to receive notification from the IRS that a balance for payment is due, although they can start as soon as one month after non-payment. You may receive a series of remind letters, getting more serious in tone each time.
  • Within 6 months, an official Tax Lien will be issued, although this could be much sooner. This claims your assets in a legal sense and ensures first payment if they are sold.
  • Your account may be passed on to a private debt collection agency. If this happens, the IRS will send you a notification with the collection agency’s contact details, or they may contact you themselves.
  • If you owe a significant amount, your case may be assigned to a Revenue Officer. This is an IRS official who goes out into the field and collects taxes on behalf of the authority. Usually, this step is only taken in extreme cases where tens of thousands of dollars or more are owed.
  • Within 3 to 6 months, if the case remains unresolved, the State Department may choose to revoke your passport to stop you travelling. The Tax Levy may be issued at this point, and you could find yourself having to deal with things like vehicles being seized and sold at auction.

Each state has its own rules about when a lien will be released, but you can expect it to happen within 30 days of a completed payment. Recently, the Fresh Start Program has made it a bit easier for taxpayers to get liens released:

  • If you enter into an approved Payment Plan to resolve the full balance, with automatic direct debit payments
  • If it can be proved that the IRS did not follow correct procedure when filing the lien
  • If the statute of limitations has expired then the lien will be released
  • If you successfully apply for the Fresh Start Program

Once this happens, you will receive a copy of the lien release notification for your records and may need to contact credit bureaus and provide them with a copy.

A lien is a legal claim against assets in order to guarantee that a commitment is fulfilled for example clearing a debt. Liens are of different types such as a court lien and big bank’s lien. The local government can also place a lien if a taxpayer becomes a defaulter. In case of an inability to repay a bank’s loan, the bank may be granted a lien. It then may take money if the lien is not closed. The property covered by the lien can later also be seized by the bank, if a settlement is not reached.

After the lien was filed, there can also be a withdrawal if the lien is closed. This happens when there is a settlement of the lien with the cooperation of the taxing authority. A tax lien is a legal claim against a property which is associated with any delinquent property tax. A tax collector can take out a lien against the property of a taxpayer if the taxpayer fails to pay his due taxes. Notice of liens by mail are mailed before the lien is attached. Usually, the authorities will release the lien within 30 days of receiving the tax which was due. Liens and levies can be distinguished from each other. The difference between a lien and a levy is that a lien is a legal claim to one’s property while a levy is a legal seizure of one’s property.

A local government or county can also place a tax lien on property for local taxes in the case of somebody who is found to be delinquent in the payment of any tax to the county. If the tax is not paid, or a settlement is not reached, the assets may be sold off to settle the due payment. A bond for the tax can also be submitted as collateral. Many a times, you can also charge your tax to a credit card to avoid a tax lien being placed. A property tax lien is a lien on any property and is used as a way of ensuring payment of the amount of tax owed by the taxpayer.=-A specific lien is the lien from a specific piece of property
instead of the lien being attached to the entire property of the debtor. A lien is attached to a property and not to a taxpayer. If some property is acquired while the lien is attached, the lien will remain attached to the property even if the property changes hands. In other words there is no change in liens if the party name changes. The payment has to be made in full before a lien can be released.

Before buying a property, one should ensure that the property is not encumbered by the tax lien by the lien of another creditor. Access of lien from public record is possible since one can easily find out about any particular lien from recording. However, post the collection of the tax, the record can be updated to reflect the release of lien. All the liens in the past are also a part of public record.

A lien for taxes on personal property can be attached as a lien to a real property owned by the same taxpayer. For example, let’s take the case of a taxpayer who has a piece of real property, henceforth referred to as parcel a. If the taxpayer does not pay the due taxes on their personal property and parcel A, Carolina county’s lien for taxes on personal and real property can both be attached as  tax lien on parcel A. In case of a property subject to a tax lien which is also subject to other liens, liens with higher priority are paid first. For example, mortgage while the IRS lien is in place, assumes a lower priority. A table charting the seniority of liens can be used to distinguish between property tax liens. This can also help determine the type of property included in that lien, different kinds of tax liens and which lien is to be paid first. Begin by finding the lien in the left-hand column and read across to determine seniority of the lien. Similarly, repeat with the next lien, find the lien in the left-hand column and read across.

Usually, a notice of federal tax lien or a lien in favor of the United States takes priority over any other lien and must be paid before other liens. However , this is not the case always. A federal tax lien is a lien in favor of the United States and
is junior to lien for taxes on real property irrespective of which lien was attached before the other. A property will be released of federal tax lien after the lien has been cleared by the taxpayer. Release of a lien after the tax debt is cleared occurs within a few days. This includes cost of lien in addition to tax. Similarly a property may also be released of federal tax lien after the lien has been struck off by order of a federal bankruptcy judge or a by the governing board of the taxes, interest, and costs.

A tax lien against your business can be extremely worrisome for a business owner. However, you can take some solace in the fact that the IRS rarely pursues criminal tax proceedings against business liens unless fraudulence is suspected. Notices before your lien is attached are sent to the taxpayer.
Hence, it is significant that prior to launching a business you should know about tax liens and what to do about a business tax lien if you are served with one. As a small business owner, you can also withhold employee income tax , social security tax etc to pay the IRS.
In such a case, a good first step is to talk with a reputable tax advisor such as the manager of tax operations for credit karma tax to help you with tax controversy, tax liens and avoiding a lien at unfavorable terms etc A tax lien is harmful as a tax lien can damage your credit score but you can try to settle the lien with the taxing authority to avoid having your assets seized. Resolved liens after seven years are removed from one’s credit history. Selling a property can also prove to be challenging as a tax lien makes that process relatively more difficult. Transfer of a lien if a lien hasn’t been released occurs as ownership is changed. A tax lien certificate is a certificate of claim against a property subject to the lien. Investing in tax certificates is met with fanfare as the lien can provide great returns on investment.

After a taxpayer is unable to pay their property tax for a particular amount of time or is unable to clear a lien by the deadline, the local government can hold a tax lien sale . Tax lien certificates are auctioned off and one can invest in a tax lien certificate. This allows the investor to pay off the tax lien and buy the original taxpayer some time as the tax lien is enforced. Many find investing in tax liens to be a very rewarding way to increase earnings since you can earn interest on the tax liens.

However, prior to investing , you should have a good command about the information on property tax liens. You should also know about all the terms included in that lien and what happens to the lien if the fair market value changes.

Take Action

Once you’ve processed your tax bill, you need to take action – even if you cannot afford to pay the amount owed. Ignoring the situation certainly won’t make it go away, but it will make it even more difficult by leading you to accrue interest, late payment penalties and other charges which raise the amount owed and leave you further away from it being sorted. The penalties for not filing taxes can lead to criminal charges.

File For An Extension

If you hope to be able to pay, but cannot immediately, you can choose to file for an extension. In that situation, you should still pay as much of your outstanding balance as possible before the April deadline – this helps you to avoid incurring additional charges. If you cannot hope to pay at all within a reasonable timeframe, arranging a payment plan with the IRS can spread the costs out a little bit and still help you avoid some of the negative consequences of non-payment.

How Can I Find Help With My Tax Lien?

Tax debt matters can be hard to understand. The help of an experienced professional can be invaluable to guide you through the complexities of your personal tax situation. Our team is experienced at navigating the often hard to understand ways that the IRS and state tax authorities operate and giving you the best advice to resolve the situation. We will work closely with you to understand the specifics of your personal circumstances and recommend an option that will best serve you. Contact us to work out a plan to resolve your outstanding tax debt, get rid of your tax lien and become debt-free.