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Basic Information regarding Tax Liens – What is a Federal Tax Lien?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property, and financial assets.

A federal tax lien exists after the IRS:

  •  Assesses your liability;
  •  Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
  •  You neglect or refuse to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

How to Get Rid of a Federal Tax Lien

Paying your tax debt – in full – is the best way to get rid of a federal tax lien. The IRS releases your lien within 30 days after you have paid your tax debt.

Options: When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.

  •  Discharge of property — Allows property to be sold free of the lien. The seller or buyer can submit Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien (PDF).
  •  Subordination — Does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage. For more information review Publication 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien (PDF).
  •   Withdrawal — Removes the public notice and assures that the IRS is not competing with other creditors for your property. If applying for a withdrawal, use Form 12277, Application for the Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (PDF).

How does a Federal Tax Lien Affect you

  •    Assets. A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
  •   Credit. Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
  •   Business. The lien attaches to all business property and to all rights to business property, including accounts receivable.
  •   Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.

What is a Tax Lien vs. What is a Tax Levy

A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt.

A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize and sell any type of real or personal property that you own or have an interest in.

How can I get my Federal Tax Lien released?

If the IRS has just filed a Federal Tax Lien against your name for back taxes, you probably received a copy of the Notice of Federal Tax Lien.

The original recording of that Federal Tax Lien is filed at the courthouse closest to where you live.

The tax lien is now a matter of public record.

This notice will be picked up by all the credit reporting agencies and you will receive solicitations from many companies saying they can remove the lien.

The question you need answered is how can a Federal Tax Lien get released.

Different ways to Release or Remove a Federal Tax Lien

  1. By paying the past due tax in full;
  2. By a successful Offer in Compromise and fulfilling the terms in full with all payments;
  3. By having the ten year statue expire;
  4. If the Federal Tax Lien was filed mistakenly, file an administrative claim with the Internal Revenue Service to have it removed.

What is a Federal Tax Lien?

An IRS Federal Tax Lien is a legal claim asserted against a taxpayer’s assets in an attempt to collect unpaid taxes. The IRS Letter 3172, Notice of Federal Tax Lien and Right to a Hearing, is sent to the taxpayer to establish public notice to all creditors that the IRS has a claim against all your current property and any property you acquire or are entitled to after the tax lien is filed.

The IRS Federal Tax Lien will remain a matter of public record until paid in full.

The sooner an IRS Federal Tax Lien is removed the faster you can get back on your financial feet.

The IRS has collection policies which require a tax professional to negotiate a solution which is a budget-wise and equitable arrangement that you and your family can live with allowing you a Fresh Start.

The Federal Tax Lien is a Legal Claim.

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets.

A federal tax lien exists after the IRS:

  •  Assesses your liability;
  •  Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
  •  You neglect or refuse to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

How to Get Rid of your Federal Tax Lien

1. Discharge of property from the Federal Tax Lien.

This allows property to be sold free of the lien. The seller or buyer can submit Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien (PDF).

2. Subordination of the Federal Tax Lien.

Does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage. For more information review Publication 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien (PDF).

3. Withdrawal of the Federal Tax Lien.

Removes the public notice and assures that the IRS is not competing with other creditors for your property. If applying for a withdrawal, use Form 12277, Application for the Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (PDF).

Different ways the Federal Tax Lien Affects You

  •     Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
  •     Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
  •     Business — The lien attaches to all business property and to all rights to business property, including accounts receivable.
  •     Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.

The Difference between a Federal Tax Lien vs a Federal Tax Levy

A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt.

A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize and sell any type of real or personal property that you own or have an interest in.

Important Federal Tax Lien Contact Information

Centralized Lien Processing.

To resolve basic and routine lien issues: verify a lien, request lien payoff amount, or release a lien, call (800) 913-6050.

Collection Advisory Group.

For all complex lien issues, including discharge, subordination, subrogation or withdrawal; find contact information for your local advisory office in Publication 4235, Collection Advisory Group Addresses (PDF).

Office of Appeals.

Under certain circumstances, you may be able to appeal the filing of a Notice of Federal Tax Lien. For more information, see Publication 1660, Collection Appeal Rights (PDF).

Taxpayer Advocate Service.

For assistance and guidance from an independent organization within IRS, call (877) 777-4778.

Centralized Insolvency Operation.

If you are questioning whether your bankruptcy has changed your tax debt, call (800) 973-0424.