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Understanding a Notice of Federal Tax Lien and What to Do About It

IRS Tax Fighters • September 8, 2023

Neglecting to pay your taxes can lead to serious consequences, and one of the most severe repercussions is the federal government filing a legal claim against all your current and future property through a federal tax lien.


In this article, we'll break down what a federal tax lien is and provide guidance on what steps you should take if you receive a certified letter indicating that you have one.


Please note that it's always advisable to seek the assistance of a specialized Tax Resolution Professional who can negotiate with the IRS on your behalf. If you'd like to schedule a free and confidential tax relief consultation, please contact us through our contact page.


What is a Federal Tax Lien?

A federal tax lien is a document filed with a county government (usually where you reside or conduct business) to notify the general public that you have an outstanding federal tax debt.


How Does It Affect Your Assets?

A tax lien attaches to all your assets, including property, securities, and vehicles. It also extends to any assets you acquire in the future during the duration of the lien.


If you sell any property while a federal tax lien is in place, the IRS will be paid before you receive your share.
How Does It Affect Your Credit?
Once the IRS files a Notice of Federal Tax Lien, it becomes public record. Credit reporting bureaus often pick up this information, which means that the federal tax lien may eventually appear on your credit report and could hinder your ability to obtain credit.

How Does It Affect Your Business?
A tax lien attaches to all your business property and rights to business property, including accounts receivable. This can significantly impact your ability to run your business normally and put you further behind.

What About Bankruptcy?
Filing for bankruptcy does not automatically eliminate your tax debt or the Notice of Federal Tax Lien. These obligations often persist even after the bankruptcy process.

Is a Lien the Same as a Levy?
The terms "lien" and "levy" are often used interchangeably, but they have distinct differences. A federal tax lien represents the government's legal claim or interest in all your property. However, the IRS does not sell off or forcefully confiscate your assets. Nonetheless, having the IRS place a chain on everything you own can certainly make your life significantly more challenging.

A levy, on the other hand, refers to the enforcement of the lien through the collection of taxes. This can include actions such as seizing funds directly from your bank account or garnishing up to 90% of your paycheck.
 
What Should You Do Next?
According to the IRS website, "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." However, for most people, writing a check for the full amount is not feasible. This is where a tax resolution specialist can be of assistance.

Contrary to the IRS's advice, your initial step should be to contact a qualified tax resolution professional, such as ourselves. Dealing with the IRS on your own is like going to court without a lawyer—it's possible, but your chances of achieving a favorable outcome are slim.

A qualified tax resolution expert can create a resolution plan, immediately communicate with the IRS on your behalf, and initiate negotiations to alleviate your tax problem.

Feel free to reach out to our firm, and we'll be happy to schedule a confidential consultation without any obligation. During this session, we'll explain the options available to you for permanently resolving your tax problem.

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