The IRS files a Notice of Federal Tax Lien to secure payment of taxes. In fact, the IRS creates secured debt when a Notice of Federal Tax Lien (NFTL) is properly filed. There are many reasons why the IRS may place a tax lien, but usually, the IRS and many states issue tax liens because of a failure to pay taxes or make payment arrangements. The tax amount threshold the IRS uses to file a Notice of Federal Tax lien is $10,000 or more. However, there are cases in which the IRS files a tax lien for taxes owed amounts less than $10,000. From 2020 to 2021, the IRS issued 27% less fewer tax liens. In 2022, NFTL issuance dropped by 25.87% from the 2021 to 2022 FY [IRS Data Book, 2022].

Updated: July 1, 2025

By: Charles P. Corsello, EA|Reviewed by: Kari Brummond, EA

IRS Tax Lien: How It Works & Important Details to Know

what is a tax lien

When you don’t pay federal taxes owed, a statutory lien automatically arises. Eventually, the IRS may file a public notice of the lien called a Notice of Federal Tax Lien (NFTL). The NFLT gets filed in the state where you live or operate your business, and it attaches to all of your assets, making it very difficult to sell, transfer, or borrow against your assets. Generally, the IRS doesn't issue a tax lien unless you owe at least $10,000 or more, and if you owe less than $50,000, you can generally avoid a tax lien if you set up payments before it's filed.

However, once the NFTL has been filed, your options are much more limited. Tax liens attach to all of your current and future assets, including your primary residence. If you want to protect yourself from the risks of federal tax liens, it’s important to understand how they work. Check out the following details and explore the links to learn more.

Table of Contents

What Is A Tax Lien?

A tax lien is the government's legal claim to your assets. It's a statutory lien, which means that it's created by law (statute). As soon as you have an unpaid tax bill, the lien exists. However, a public record of the lien doesn't exist until the IRS files a Notice of Federal Tax Lien. After filing the NFTL, the IRS has five days to notify you, and the lien notice spells out your appeal rights. The lien attaches to all of your current assets and your rights to property.

How does that work? Well, say you go to sell a vehicle and you have the title in hand. When the new buyer tries to register the vehicle in their name, the lien will show up on the title search, and they will be told that there is a lien attached to the vehicle There are a few ways to deal with this (all of which require IRS approval) so that you can transfer the asset, but if you don't take any of those steps, the lien will stay attached to the vehicle, meaning that the IRS has the right to sieze the vehicle even after it's been transferred to a new owner.

Or here's another example: say that there's a federal tax lien attached to your home. There's also a lien from your mortgage holder. Now, imagine that you want to sell the home. The closing company will need to use the proceeds of the sale to satisfy both of the liens. Then, if there are any remaining funds, that money will go to you. If the liens are worth more than the sale price of the home, you'll need to convince the IRS to discharge (remove) the lien from this property so that the sale can move forward.

The IRS uses tax liens to secure payment of taxes. From 2022 to 2023, the IRS issued 13% more notices of federal tax lien [IRS Data Book, 2023]. In fact, there were 157,323 issued in FY 2022 and 179,019 issued in FY 2023.

Options for Resolving IRS Tax Liens

There are several different ways to resolve a tax lien. The resolution option you should select depends on your goals. Here is a brief overview of each resolution option and links to resources with more information:

Tax lien release -- The lien no longer exists, and you do not owe the tax associated with the lien. To get the lien released, you can pay in full, get qualified for an offer in compromise and satisfy the terms of the offer, or prove that the tax assessment was incorrect.
Tax lien withdrawal -- This removes the Notice of Federal Tax Lien from the public record. There are two options: 1) get the lien released as explained above and then, the IRS will withdraw it after you have paid and filed successfully for three tax years, or 2) convince the IRS to release the lien by setting up a payment plan, but you must owe $25,000 or less, pay off the balance within 60 months or by the collection expiration date if sooner, and set up direct debit payments. Use Form 12277 to apply.
Lien discharge -- This is when you get the IRS to remove the lien from one or more specific pieces of property. You may want to apply for a Discharge Certificate if the property's equity has no value, there is a co-owner who doesn't owe the debt, you want to sell the asset and give the proceeds to the IRS, or you want to borrow against the asset. Use Form 14135 to apply.
Lien subordination -- This is when you ask the IRS to let its lien take priority behind another lender -- generally, so that you can take out a new loan using that asset as collateral, get a cash-out refinance, or refinance to lower your payments so that you have more disposable income to pay the IRS. Use Form 14134 to apply.

How to Appeal a Federal Tax Lien

The link above explains how to appeal a federal tax lien once the IRS files it. There are a few different options to appeal a lien, and the right option depends on when the IRS filed the lien and your goals with the appeal. The main options include:

CDP hearing -- Must request within 30 days of the date on the Notice of Federal Tax Lien letter. Make the request in writing or by filing Form 12153.
Equivalent hearing -- Use the same form as you use to request a CDP hearing, but you have up to one year from the date on the Notice of Federal Tax Lien letter. Use Form 12153 to apply, but note equivalent hearing on line 2.
Collection Appeals Program -- Apply before or after the lien is filed, or after you get denied for a request to discharge, subordinate, or withdraw a tax lien. Apply for a CAP appeal using form 9423.

All of these appeal options give you a chance to talk about the situation with an Independent Appeals office that is separate from the IRS. In all cases, you can appeal based on the lien being filed in error or causing economic hardship. You can also use appeals to request lien subordination, discharge, or withdrawal, and you may also ask about payment plans and settlements. If you don't agree with the results of a CDP or CAP hearing, you have further appeal rights, but not with an equivalent hearing.

Differences Between Liens and Levies

A tax lien secures the IRS or state revenue department's interest in your assets. In contrast, a tax levy is when the tax agency seizes your assets. Liens typically come before levies but not in every situation.

Tax Lien FAQs

Answers to commonly asked questions about federal tax liens. Understand how a tax lien works and what you can do about a federal tax lien.

IRS or State Tax Lien Professional Help

Learn how we can help with your federal tax lien. Find the top tax professionals who can help with IRS or state tax liens. Start your search by clicking the "Find a Local Tax Pro" button in the header of this page to find tax professionals who can help with tax liens. Or start your search in the search box. Then, filter your results to find a pro who has experience with liens or with the solution you want (for example, subordination, discharge, etc.). Wondering how to find high quality help that you can trust? Then, start your search on TaxCure or explore these links for guidance: