What is a Tax Lien?
A tax lien gives the IRS a legal claim to your property as security or payment to your tax debt.
Notice of Federal Tax Lien
A Notice of Federal Tax Lien may be filed only after:
- The IRS assesses the liability;
- The IRS sends you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
- You neglect or refuse to fully pay the tax debt within 10 days after the IRS notifies you about it.
Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that the IRS has a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.
Releasing A Lien
The IRS will issue a Release of the Notice of Federal Tax Lien:
- Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
- Within 30 days after the IRS accepts a bond that you submit, guaranteeing payment of the debt.
In addition, you must pay all fees that a state or other jurisdiction charges to file and release the lien. These fees will be added to the amount you owe.
Usually 10 years after a tax is assessed, a lien releases automatically if the IRS has not filed it again. If the IRS knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government, but not IRS employees, for damages.
Applying for a Discharge of a Federal Tax Lien
If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to
Making the IRS Lien Secondary to Another Lien
In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination.
By law, a filed notice of tax lien can be withdrawn if:
- The notice was filed too soon or not according to IRS procedures,
- You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
- Withdrawal will speed collecting the tax, or
- Withdrawal would be in your best interest, and in the best interest of the government.
The IRS will give you a copy of the withdrawal, and if you write to the IRS, they will send a copy to other institutions you name.
Appealing the Filing of a Lien
The law requires the IRS to notify you in writing not more than 5 business days after the filing of a lien. The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it by certified or registered mail to your last known address. Some of the issues NFA Tax Help can assist with by representing clients before the IRS are:
- You paid all you owed before the lien was filed,
- The IRS assessed the tax and filed the lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
- A procedural error in an assessment made by the IRS,
- The time to collect the tax expired before the lien was filed,
- You did not have an opportunity to dispute the assessed liability,
- You wish to discuss the collection options, or
- You wish to make spousal defenses.
At the conclusion of your Collection Due Process hearing, the IRS Office of Appeals will issue a determination. That determination may support the continued existence of the filed federal tax lien or it may determine that the lien should be released or withdrawn. If you disagree with Appeal's determination, there is a 30-day period starting with the date of determination, in which you may request judicial review in a court of proper jurisdiction.