What Is a Tax Lien? Everything You Need to Know

Did you know that Americans owed over $114 billion to the government last year due to not paying taxes on time? If you weren’t able to file on time, then you’re likely wondering about what types of consequences they’ll be.

These consequences typically come in the form of a tax lien. But, exactly what is a tax lien? If you want to learn more about this concept (and, more importantly, how to get rid of it), then you’re in the right place.

In this article, we’ll teach you everything you need to know about tax liens. That way, you can get out of it and avoid it in the future. Let’s get started!

What Is a Tax Lien?

A tax lien is a legal claim that the government can use to take your property. The IRS is responsible for issuing this claim. It’s used if you forget or refuse to pay your taxes.

The point of a tax lien is essential to protect the government’s interest in your property during tax season. This property includes any real estate that you own, financial assets (like stocks), and any personal property.

So, how does a tax lien work? First, you either refuse to pay your taxes, or you aren’t able to pay them on time. When this happens the IRS will mark in their books that balance that is due to them.

This assesses your liability. After they’ve recorded this amount, then they will send you a Notice and Demand for Payment in the mail. This is a bill that explains the amount of money that you owe.

Keep in mind that in addition to the Notice and Demand for Payment the IRS will also file a Notice of Federal Tax Lien.

This is a public document that’s used to inform any creditors that the United States government has a right to your property.

How Can a Tax Lien Affect You?

There are multiple ways that a tax lien can affect you. For one thing, it places all of your assets at risk. Not only that, but it can also place your future assets at risk.

This includes any properties your own, vehicles you use, and securities you have. A tax lien also affects your credit. Your credit score will undoubtedly fall once the notice has been placed against you.

As such, this will severely limit the amount of money that you can borrow. A tax lien can also affect your business finances. How? The lien attaches to any business property, including any receivable accounts that you might have.

Finally, even if you successfully file for bankruptcy a tax lien can follow you. Any tax debt that you owe is likely to continue even after you file bankruptcy.

The Best Way to Get Rid of a Tax Lien

If you discovered a federal tax lien has been placed on you, then you’re probably anxious to get it off as soon as possible. The best, and quickest, way to get rid of a tax lien is to pay the amount that you owe in full.

When you do this the IRS will have thirty days to release your lien. Sadly, this isn’t a valid option for people that don’t have the money to pay the government.

The good news is that this isn’t the only option. There are other steps that both you and the government can take to minimize the impact that the lien has on you.

In this section, we’ll go over some of the other things that you can do. Just remember that all of these methods will likely require professional tax consultation.

The good news is that there are a variety of businesses that can help with back taxes owed.


In some scenarios, the IRS may withdraw the lien if it affects the collection of the amount owed. One example is if a defense contractor gets a lien placed on them.

When this lien happens the individual will immediately lose the security clearance that’s been given to them. That means that they will lose their job, which means that they can’t pay back the amount that they owe the IRS.

The IRS may also consider withdrawing your lien if the amount that you owe is less than $10,000.


A lien subordination doesn’t completely remove the lien. But, it does give you the ability to take out a mortgage or refinance your existing one. With this process, the IRS will agree to subordinate to a traditional lender.

Just remember that the IRS will only do this when it benefits them. For example, if you refinance your home, then the IRS will expect you to give your increased mortgage savings to them.

Discharge of Property

Discharge of property refers to when the government removes the lien on a specific piece of property.

However, the other liens remain on your other property. There are three possible reasons why the IRS might agree to discharge a property. They include:

  • The government doesn’t have any interest in the property
  • The proceeds received from the sale are equal to the IRS’s interest in the property
  • The individual has other properties that are at least double in value of what is owed through the lien

Enjoy Learning About Tax Liens? Keep Reading

What is a tax lien? As you can see, a tax lien not only threatens your assets but also your credit for years to come.

As such, you must do everything in your power to avoid them. And, if you do have one, make sure to contact a professional. That way, you minimize the amount that you need to pay.

Did you enjoy this article? If the answer is yes, then you’re in the right place. Keep exploring to find more topics that you’re sure to love.