Federal Tax Lien Government Tax Liens
Tax Lien: This is a legal claim to your property as security or collateral for payment of tax debt. Basically, the IRS is telling you your property is now eligible to be seized and is being used as a security for your debt.
If the IRS files a Notice of Federal Tax Lien, all your creditors are publicly notified. Liens may occur when: The IRS assesses your outstanding tax liability. The IRS sends you a Notice and Demand for Payment in the amount owed.
You do not pay the entire debt within 10 days after you are notified.
If you have paid your taxes due or made arrangements for payments within the 10 day time frame, then the IRS will send you a release of the Notice of Federal Tax Lien within 30 days.
Tax liens in connection with property taxes. Unlike personal debts, tax liens on real estate
"run with the land"; that is, a property owner becomes responsible for payment even if the tax
obligation was incurred by a prior owner. Depending on the law of the state or jurisdiction,
the owner of the property may also be personally liable for payment of the taxes.
Payment of a tax lien may occur through various methods:
Payment may be made directly by the property owner or, in many cases, indirectly by the mortgage holder using an escrow account. Notice is given both to the property owner and mortgage holder when a property tax is delinquent; thus, even if the property owner does not have an escrow account on the mortgage, the mortgage company will receive notice of the delinquency and may pay the tax. The mortgage company will then demand repayment from the owner/borrower and/or create an escrow account to recoup the proceeds, since the mortgage company might lose some of the value of its mortgage lien if the property were sold by the taxing agency to satisfy unpaid taxes foreclosure.
If a property is sold by the owner prior to tax foreclosure by the government body, the tax lien (which is generally discovered as part of a title search) is usually paid as part of closing costs from the sale proceeds.
Procedures vary from state to state. Generally, in the event a tax lien on personal property is not paid within a specified time (and after several notices are generally given), the property may be seized and sold at foreclosure sale. On real property, one of two methods may be used: either the property may be seized and sold (a tax deed sale), or in some States the tax lien may be offered to investors (in the form of a tax lien certificate) with an accompanying right for the investor, after a specified period of time, to institute foreclosure proceedings (a tax lien sale).
Federal Tax Lien Procedures
Notice of Federal Tax Lien
Find out how liens give us legal claim to your property.
Releasing a Lien
Do you have a lien filed against you? Find out when and how liens are released.
Let us assist you in calculating your payoff.
Applying For a Discharge of a Federal Tax Lien
When can I apply for a Discharge of the Federal Tax Lien?
Making the IRS Lien Secondary
Find out how an IRS Lien can be made secondary.
Find out how or when a lien can be withdrawn.
Find out how to contact the IRS when you have inquires about a lien.
Appealing the Filing of a Lien
Tell me more about appealing the filing of a lien.
Notice of Federal Tax Lien
Liens give us a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:
- We assess the liability;
- We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
- You neglect or refuse to fully pay the debt within 10 days after we notify you about it.
Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.
Releasing a Tax Lien
We will issue a Release of the Notice of Federal Tax Lien:
- Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
- Within 30 days after we accept a bond that you submit, guaranteeing payment of the debt.
In addition, you must pay all fees that a state or other jurisdiction charges to file and release the lien. These fees will be added to the amount you owe. Refer to Publication 1450, Request for Release of Federal Tax Lien.
Usually 10 years after a tax is assessed, a lien releases automatically if we have not filed it again. If we knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government, but not IRS employees, for damages.
The full amount of your lien will remain a matter of public record until it is paid in full, including all accruals and additions. However, at any time you may request an updated lien payoff amount to show the remaining balance due by calling the toll-free customer service telephone number at 1-800-913-6050. An IRS employee will issue you a letter with the current amount that must be paid before we release the Notice of Federal Tax Lien.
Applying for a Discharge of a Federal Tax Lien
If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien.
Making the IRS Lien Secondary to Another Lien
In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Refer to Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien.
Withdrawing Tax Liens
By law, a filed notice of tax lien can be withdrawn if:
- The notice was filed too soon or not according to IRS procedures,
- You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
- Withdrawal will speed collecting the tax, or
- Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.
We will give you a copy of the withdrawal, and if you write to us, we will send a copy to other institutions you name.
If you have questions regarding basic lien inquiries such as routine lien releases and lien payoff amounts, contact the Centralized Lien Unit by calling the toll free telephone number (1-800-913-6050).
When faced with a complex lien issue, consider contacting the Collection Technical Services (TS) Advisory function. TS Advisory is a collection compliance function that interacts with taxpayers on complex lien issues such as: Certificate of Discharge, Subordination, Subrogation, Non-Attachment, Withdrawal and other complex lien issues. Publication 4235, Technical Services Advisory Group Addresses should be used to locate the appropriate office to contact for assistance.
Appealing the Filing of a Tax Lien
The law requires us to notify you in writing not more than 5 business days after the filing of a lien. We may give you this notice in person, leave it at your home or your usual place of business, or send it by certified or registered mail to your last known address. You may ask an IRS manager to review your case, and you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice. You must file your request by the date shown on your notice. Some of the issues you may discuss include:
- You paid all you owed before we filed the lien,
- We assessed the tax and filed the lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
- We made a procedural error in an assessment,
- The time to collect the tax (called the statute of limitations) expired before we filed the lien,
- You did not have an opportunity to dispute the assessed liability,
- You wish to discuss the collection options, or
- You wish to make spousal defenses.
At the conclusion of your Collection Due Process hearing, the IRS Office of Appeals will issue a determination. That determination may support the continued existence of the filed federal tax lien or it may determine that the lien should be released or withdrawn. If you disagree with Appeal's determination, there is a 30-day period starting with the date of determination, in which you may request judicial review in a court of proper jurisdiction. Refer to Publication 1660, Collection Appeal Rights.