IRS Tax Lien: How It Works & Important Details to Know
When you don’t pay federal taxes owed, an IRS tax lien will ensue in many cases. A tax lien is the IRS’s legal claim to all of your assets or property. It is the first major step the IRS takes against delinquent taxpayers. The IRS uses liens to ensure taxpayers pay their taxes owed. If you want to get a lien removed, it’s important to understand how they work. Explore the following links to learn more.
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].
There are many ways to release or withdraw an IRS tax lien. You can also request a tax lien withdrawal, which removes the existence of a Public Notice of Federal Tax Lien if you meet specific conditions. A tax lien can hold you back financially, so taking action as quickly as possible is important. This link explains your options, and once you understand your options, you can decide which method works best for you based on your financial situation and how much tax you owe.
Understand how and when to use IRS Form 12277 or the Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. Although the major credit bureaus removed tax liens from most consumer credit reports, other tools used by lenders may still report them.
The link above explains how to appeal a federal tax lien once the IRS files it. There are many circumstances in which you can appeal an IRS tax lien. If you win the appeal, the IRS has to remove the tax lien.
The IRS and many states may discharge a tax lien on a specific piece of property in different situations. Understand the use cases for requesting a discharge, how to make the request, and some of the situations or reasons the IRS may grant the request.
The IRS and many states may subordinate a tax lien if it is in the “best interests” of the government. Requesting a Certificate of Subordination of Federal Tax Lien can help you or your business refinance a mortgage, especially if you can show the IRS or state that you cannot pay in full. Get a better understanding of how, when, and why you may want to request a Federal tax lien subordination.
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.
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.
Learn how we can help with your federal tax lien. Find the top tax professionals that 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 that can help with tax liens.