TN Tax Liens: What to Expect and How to Resolve

Behind on your Tennessee taxes? Then, the Department of Revenue can issue a tax lien that attaches to all of your assets. Liens make it very difficult to sell, transfer, or borrow against your assets – but there are resolution options. 

The best solution is to work with the DOR and set up payment arrangements before they file a lien. But if that's not possible, a tax pro can help you explore other options. To get help now, use TaxCure to find a TN-based tax pro who can help you deal with tax liens and tax debt in the Volunteer State. 

Key takeaways

• TN tax lien – used to secure the state's interest in your assets if you have unpaid taxes.
• When filed, if you owe TN state taxes. 
• How it affects you – gives the state the right to the proceeds if you sell your assets.
• Release – the DOR will release your obligation if you pay in full or qualify for and pay a settlement.
• Discharge – the DOR removes the lien from a specific asset, typically so you can sell or transfer the asset.
• Subordination – the DOR lets its lien fall in priority behind another lien, so you can take out a loan to pay the tax.

What is a Tennessee tax lien?

A tax lien is the state's legal claim to your assets for unpaid taxes. Say you owe $100,000, and the DOR files a tax lien against you. The lien gives the state the right to $100,000 worth of your assets – if you sell an asset, you don't get to pocket the funds. Instead, the sale proceeds up to $100,000 go directly to the state. 

Why does the DOR file tax liens?

The DOR files tax liens to ensure it gets paid when a taxpayer doesn't pay their taxes voluntarily. Tax liens may act as precursors to tax levies, which are when the DOR actually seizes your assets (ie, wage garnishment, bank levies, or asset seizure), but it doesn't always shake out that way. Often, the tax lien just stays in place until you sell or transfer your assets.

Tennessee tax liens – what to expect

The DOR may file tax liens for any unpaid state taxes, including:

• Sales and use tax
• Excise tax
• Business tax
• Franchise tax
• Unemployment insurance tax

Businesses may incur a tax liability by filing a return and not paying, having the DOR adjust a return, having the DOR file a tax return on the business's behalf, or due to failing an audit and incurring a tax liability. The face value of the lien also includes penalties and interest that have accrued on the taxpayer's account. 

Liability for tax liens

Because Tennessee doesn't have a personal income tax, all tax liens arise from business tax debt and attach to business assets. But depending on the structure of the business and the type of tax, some liens may attach to personal assets as well. To determine if you're personally liable for Tennessee business taxes, consult with a tax professional. 

However, there are a couple of notable exceptions – if you co-mingle personal and business funds, the state may hold you personally liable for state taxes even if your business is a limited partnership, LLC, or corporation. Additionally, the state can hold you personally liable if fraud or evasion is involved.

What if my business is an S-Corp?

An S-corp is a tax election, not a legal business structure. To determine your potential liability for business taxes, you must consider the legal structure of your business, which is typically an LLC or a C-corp if you've elected to be taxed as an S-corp.

How to resolve a TN tax lien

The best resolution option depends on your objectives, your finances, and what the DOR is willing to accept on your account. An experienced tax professional can go over everything with you and steer you toward the best option. 

Here are the main ways to deal with a tax lien in Tennessee.

• Lien release due to error – The state will release the lien and withdraw it from the public record if you prove that it was issued in error. 
• Pay in full – If you pay in full, the state will release the lien, meaning that you no longer owe the tax, but the record of the old lien may still be publicly available. After you pay in full, the DOR sends the release to the county clerk, and then, they typically release the lien within seven to 10 days.
• Installment agreement – If you set up monthly payments, the lien will continue to exist, but the DOR will not move forward with wage garnishments or asset seizure. Once you complete all of the payments, the DOR will release the lien.
• Offer in compromise – If you qualify for an offer in compromise (paying off your tax liability for less than owed), then the state will also release the lien. 
• Discharge – The DOR may be willing to discharge (remove) the lien from a single piece of property. Typically, they will only do this if you're selling the property and putting the proceeds toward your tax liability or if you're transferring a property that has no equity to cover the tax liability.
• Subordination – If you want to take out a loan against some of your property and use the proceeds to pay off or down your tax debt, the TN DOR may be willing to put their lien behind the lender's lien using a process called subordination.

Sometimes, you may end up using multiple strategies. For instance, you may set up payments to stop the DOR from moving forward with asset seizure, but then, you may also want to request a lien discharge so that you can sell property either to put the proceeds toward the debt or because you're done using that property in your business and need to get rid of it.

How to get help with TN tax liens

Tax liens can put your business at risk, and potentially even threaten your personal finances. That's why it's critical to get skilled representation. Keep in mind that the big firms that advertise online and through traditional marketing avenues are often not equipped to deal with lien subordination, discharge, or release – and they tend to lack state-specific experience. 

If you want a customized solution built around your specific needs, you should work with a small firm or tax pro who's focused exclusively on tax resolution. But with so many options, where do you start your search? Right here on TaxCure. 

You can start your search now by selecting the TN DOR (and the IRS if you're also dealing with federal tax debt). Then, you can narrow down the search to find pros who have dedicated experience with TN tax liens, and finally, you can review profiles until you find the right match for your needs. 

Don't wait – protect your business and your assets by getting help today. Learn more about how to use TaxCure.

TN tax lien FAQs

How long does a Tennessee tax lien last?

TN tax liens last 10 years, but they can be renewed indefinitely. That means that a tax lien can last your whole life, and if you die, the lien may still be attached to your assets.

Can a Tennessee tax lien be removed without paying in full?

If you qualify for an offer in compromise, the TN DOR will release the tax lien once you pay the settlement on your offer. That lets you pay less than owed, while also getting rid of the tax lien.

How do I find out if I have a tax lien in Tennessee?

Tax liens are public records. Contact the county clerk in your area to see if a lien has been recorded against you. Otherwise, reach out to the DOR or contact a tax professional to help you.

Does a Tennessee tax lien affect my personal credit?

Typically, no, liens do not appear on credit reports. But they are public records, so they will impair your ability to get loans.

Can I sell property with a Tennessee tax lien?

Yes, but the process will be complicated, and the title will not transfer unless the closing company or a similar entity sends all of the proceeds of the sale to the DOR. However, if the proceeds aren't enough to satisfy the full payment, you will need to get a discharge before you can complete the sale. 

How do you find a payoff amount for a TN tax lien?

To find the payoff amount, contact the Special Procedures Section of the DOR at (615) 741-7074 or [email protected]. You may also be able to find a payoff amount through your TNTAP account. Keep in mind that the payoff amount includes your tax liability, penalties, and interest, as well as lien filing costs, which are added by the county recorder. A tax pro can also find the payoff amount for you.

Where can I get a copy of a lien release?

Once the lien has been released, you can get proof from the county register of deeds. You can also get a copy of the recorded lien before it's released, if needed.