A tax lien is a legal claim that the IRS places on a taxpayer’s property when they fail to pay their tax debt. The lien gives the government the right to claim assets, including real estate, vehicles, and financial accounts, as collateral until the debt is paid. The IRS typically files a Notice of Federal Tax Lien, which becomes a public record and may negatively impact the taxpayer’s credit score.
Once a lien is in place, it attaches to all of the taxpayer’s property, including future acquisitions, until the debt is paid or the lien is otherwise resolved. A tax lien does not result in the immediate seizure of property, but it can make it difficult for the taxpayer to sell or transfer assets.
To resolve a tax lien, taxpayers can:
- Pay the tax debt in full, including interest and penalties.
- Request a Lien Withdrawal if the debt is resolved or if the lien was filed in error.
- Enter into a payment plan with the IRS, which may result in the lien being released after consistent payments are made.
A tax lien can have significant financial consequences, but taxpayers can take steps to remove or reduce its impact by addressing the underlying tax debt.