A federal tax lien is the IRS's claim on your assets after an assessed tax goes unpaid. A filed Notice of Federal Tax Lien alerts creditors and can complicate sales, refinancing, or title searches. You generally have 30 days to request a Collection Due Process hearing to challenge the lien or propose alternatives. Options to resolve a lien include paying in full (which triggers release within 30 days), installment agreements, Offers in Compromise, or Currently Not Collectible status. Consult a tax professional for complex cases.
What is a federal tax lien?
A federal tax lien is the government's legal claim against your property when you don't pay a tax debt. Under the Internal Revenue Code, a lien arises automatically when the IRS assesses a tax, sends a notice and demand for payment, and you fail to pay. The IRS often files a Notice of Federal Tax Lien (NFTL) publicly to alert creditors.
What the notice means for you
A filed NFTL does not itself seize assets. It announces the IRS's priority claim against your property - including real estate, vehicles, and rights to other assets. Separately, the IRS can use levies to actually take money or property (bank levies, wage garnishments, seizures).
Until resolved, a lien can make selling or refinancing property difficult because it clouds title. Major credit reporting agencies removed most public-record tax liens from consumer credit reports in 2017-2018, so a lien typically won't appear on a standard credit report today, but lenders and title companies can still find it in public records.
Immediate steps after you get the notice
- Read the notice carefully. It explains the assessed liability, the period for challenging the lien, and appeal rights.
- Verify the debt. Check IRS account transcripts or contact the IRS Collections unit to confirm the assessment and amount owed.
- Consider a Collection Due Process (CDP) hearing. After the IRS files an NFTL, you generally have 30 days to request a CDP hearing to dispute the lien or propose collection alternatives. If you request a hearing, you can raise collection alternatives like an installment agreement or Offer in Compromise.
- Protect assets from levy. If you face a pending levy, act quickly. A CDP request or timely agreement may halt collection actions.
Ways to resolve or limit a lien
- Pay the balance in full. The IRS must release the lien (recorded with the county) within 30 days after full payment.
- Enter an installment agreement. The IRS may agree to terms that address the lien; some direct-debit plans or qualifying agreements can lead to lien withdrawal or subordination.
- Offer in Compromise. If you qualify, an OIC can settle your tax debt for less than the full amount.
- Currently Not Collectible (CNC). If you can't pay now, the IRS may temporarily delay collection, though the lien remains in place.
- Request lien withdrawal. In limited circumstances (procedural error, certain payment agreements, or economic hardship), the IRS can withdraw an NFTL to simplify your financial recovery.
Get help if needed
Tax collection rules are complex. If the amounts are significant or the consequences severe, consult a tax attorney, enrolled agent, or CPA who specializes in IRS collections. They can review options, request hearings, and negotiate on your behalf.
Resolving a federal tax lien usually requires timely action. Verify the notice, use appeal rights, and pursue a payment or compromise plan that fits your finances.