FAQ: What is a Federal Tax Lien?

In Blog, FAQ by TSL Team


Whether you are looking to invest in real estate, want additional information on your tax sale list or you are subject to collections, it would be a good idea to understand just what a tax lien really is. When a tax lien is placed against a property at risk this simply means that there's a debt owed to the federal government. The federal lien is a record of the government's legal claim against the property in other words.

The government will place a tax lien against the property when the owner neglects or fails to pay a tax debt. The lien protects the government’s interest should the owner be unable to pay the outstanding debt. This can include but is not limited to all your property, including real estate, personal property, and financial assets.

Inside a federal tax lien

Who places a tax lien on your property? The IRS is responsible for the handling of any distressed property. Once it's been determined that you are late on taxes, the IRS puts your balance due on the books. Once they have assessed your liability, they will send you a bill that explains how much you owe.

What happens when I can't pay the tax lien? Should you neglect or refuse to fully pay the debt in time, further action will be taken. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

How can I get rid of the lien? The best way to remediate this issue is simply to pay your tax debt. This 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.

When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.

What does a discharge of property mean? A "discharge" removes the lien from specific property. There are several Internal Revenue Code (IRC) provisions that determine eligibility. For more information, refer to Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien (PDF) and the video Selling or Refinancing when there is an IRS Lien.

Want to learn more about what a tax lien is, or how to pay off a tax lien subscribe to Tax Sale Lists today.