Notice of Federal Tax Lien

What Is a Federal Tax Lien?

A Notice of Federal Tax Lien is public notice that you owe the IRS money. It will be issued by the IRS when a back tax liability goes unpaid. The IRS has the right to file a Federal Tax Lien anytime you owe more than $10,000 and have not paid the balance due after their first demand for payment.

Once a Notice of Federal Tax Lien is filed, your tax problems become a matter of public record. Anyone considering doing business with you — banks, vendors, and customers — will know that you are behind on your taxes, which may influence their business decisions.

A Notice of Federal Tax Lien makes the IRS a secured creditor by giving them a legal right to all of your assets. If you want to sell an asset, you will have to pay the IRS the amount of their claim in the property to discharge the lien and transfer the asset with a clean title.

How Does a Federal Tax Lien Work?

A Notice of Federal Tax Lien attaches to anything you own now or acquire in the future — including your home, vehicles, equipment, bank accounts, stock, accounts receivable, inheritances, and more. The list is endless — it literally attaches to all property and rights to property, now and in the future.

For instance, if you own a home with equity, an IRS tax lien will attach to that equity and when you sell or refinance your home, the IRS is going to either be paid in full or refuse to discharge their tax lien. If the IRS files a tax lien and you then inherit a house, the lien automatically attaches to it — and to any other property that you acquire in the future.

Will a Federal Tax Lien Show Up on My Credit Report?

A Notice of Federal Tax Lien will appear on your credit report driving your credit score down and making it difficult, if not impossible, to get a loan. Even after you pay a lien and the IRS releases it, it will continue to appear on your credit report. While it will show as "released" or "satisfied," a Notice of Federal Tax Lien remains a part of your credit report for seven years from the date it was released (not from when it was filed).

If you have the ability to do so, it is always a good idea to avoid a Federal Tax Lien. If you can get a loan to pay your taxes, it is best to do so now before the lien affects your credit score. A good goal may be to get a loan to pay your total balance to the IRS under the $10,000 threshold so that they will not file a lien against you.

Beware of Other Tax Resolution Companies

A Notice of Federal Tax Lien is a public record available to anyone who goes looking for it, and many companies in our industry employ large call centers that cold-call anyone and everyone with a Federal Tax Lien. Many of these companies have questionable business practices.

Before doing business with these tax companies, we strongly encourage you to visit the Better Business Bureau as well as Ripoffreport.com. Be wary of anyone promising a quick and easy IRS Tax Lien Release.

In short, it is extremely rare to get a Federal Tax Lien released once it has been filed. If you are basing your decision to hire someone on a promise that they are going to remove the tax lien, you will probably be disappointed to learn that they are unable to do so.

For your options on getting a lien released, visit our Tax Lien Release page.