Tax Liens 101

If you’ve received a tax lien filing, this brief tax liens guide will help you understand your situation and what you can do about it.

What is a Tax Lien?

A tax lien is a kind of mortgage the IRS can put on your property if you haven’t paid your taxes. It’s a legal claim the IRS makes to your property as security for tax liability. They can do this whether the unpaid taxes are property taxes or income taxes.

How Do Tax Liens Work?

A tax lien is usually triggered when the government decides they may have difficulty collecting the taxes you owe before the Collection Statute Expiration Date (CSED), which is usually 10 years after their initial assessment.

The IRS’s tax lien process involves four steps:

Assessment for liability (the IRS determines that they need to file a lien).
The IRS serves you a notice and a demand for payment.
You fail to pay the debt in time.
The IRS issues the lien.

The best solution is to pay off your outstanding tax debt immediately when you receive the notice and the demand for payment. You should also contact a tax professional immediately if you receive one of these communications. However, if immediate payment is not possible, you still have plenty of options.

Tax Lien Implications

If the IRS issues a lien against your property, you can face the following consequences:

Employment prospects: The lien is a public document visible to anyone who looks you up on the court’s website. Potential employers who see this may be reluctant to hire you.
Lending power: Liens no longer go on credit reports or affect your credit score directly. However, creditors can see the lien against you and will be unlikely to lend to you. With a lien on your property, you can no longer borrow against your home.
Selling options: If you want to sell your home, you’ll have to deal with the lien first. A buyer would have to take on the lien themselves if they buy your property, which few would be willing to do.
Asset seizure: If you ignore a tax lien, the government ultimately has a claim to issue a levy and seize property like your home and business assets.

Tax Lien Foreclosures

As soon as you have a lien issued against you, you must take action to resolve it. Depending on your location, you may have a grace period of a few months to pay the outstanding taxes. If you fail to address the lien during this time, the IRS will likely issue a levy, seizing your property. At that point, if you don’t settle the tax you owe, they will proceed to foreclosure.

Tax lien foreclosure means the government claims ownership of your property. After giving you a final chance to pay the taxes you owe and redeem your home, they auction it to recover the tax money. Sometimes, they can go straight to a tax deed sale, skipping the conventional foreclosure process. That means they sell your home immediately without offering you another chance to redeem it.

Resolving a Tax Lien

If you take action to resolve a tax lien, you’ll usually aim for one of four main positive outcomes, depending on your situation:

Release: You pay off all or enough of your outstanding taxes for the government to formally remove the lien. You may be able to negotiate an Offer in Compromise or an Installment Agreement if you can’t pay the total amount at once.
Discharge: The government agrees to remove the lien from a particular property, but the lien still stands against you and affects other property until you pay outstanding taxes.
Subordination: The government agrees to let other creditors, like a bank, claim from you first. Subordination could make refinancing your home or getting a loan possible.
Withdrawal: The government removes the lien and cancels all its effects on you and your property, even if you have not paid all outstanding taxes. Depending on your circumstances, this may only be possible with negotiation and the help of a tax attorney.

A tax professional can help you understand the best outcome possible for your case and work with you to achieve it.

Resolve Your Tax Lien With Polston Tax

Polston Tax Resolutions & Accounting can work with the IRS to release your tax lien in several ways. We can help you set up an installment plan or an Offer in Compromise and obtain a lien release commitment in exchange for payment. We can also request a certificate of subordination to another creditor or negotiate for a partial release or a withdrawal.

All these options require timely communication via written requests and proposals. It’s more than just paperwork — it’s an ongoing appeals process. Our experienced tax lawyers know how to negotiate the paperwork to get rid of your tax lien.

If you’ve received a tax lien notice, give us a call or schedule a free consultation here.