Liens
A lien is different from a levy. A levy takes your property or assets, where a lien secures the government’s interest in your property.
- A federal tax lien is a legal claim to your property (such as real property, securities and vehicles), including property that you acquire after the lien arises.
- If the IRS files a lien against your business, it attaches to all business property and to all rights to business property, including accounts receivable.
A lien is just one of the collection procedures the IRS may use if you file or pay your taxes late. IRS Publication 594, The IRS Collection Process, helps you understand the entire IRS collection process.
A federal tax lien arises automatically if you don’t pay the amount due after receiving your first bill. The government also may file a Notice of Federal Tax Lien (NFTL) in the public records.
- This notifies creditors the IRS has a claim against all your current and future property; and
- The NFTL may appear on your credit report and may harm your credit rating;
- To reduce the harm to your credit rating read Releasing a Lien and Withdrawing a Lien in the What should I do? section.
Generally, within five business days of filing the NFTL, the IRS will send you a Notice of Your Right to a Collection Due Process Hearing. You’ll have until the date shown on the notice to request a Collection Due Process (CDP) hearing with the Office of Appeals. See IRS Publication 1660, Collection Appeal Rights, for a full explanation of the CDP process. At the CDP hearing, you may raise many issues which include proposing another way to pay your debt, and in some cases, to contest the debt itself.
Once a lien arises, the IRS generally can't release it until you’ve paid the tax, penalties, interest, and recording fees in full or until the IRS is no longer legally able to collect the tax. However, in certain circumstances, explained below in the What should I do? section, a lien may be withdrawn, discharged, or subordinated.
First and foremost, don't ignore notices from the IRS. Even if you can’t pay the taxes you owe, responding to a notice before the due date could prevent a lot of trouble. Be sure to keep your address up to date with the IRS so you receive all notices and letters.
- If you can’t pay the full amount you owe, you have payment options to help you settle your debt over time.
- If you disagree with the IRS that you owe the debt, you may be able to raise your arguments in a CDP hearing or request an audit reconsideration.
- You can hire an attorney, certified public accountant (CPA), or enrolled agent to help you if you wish. But before you do, visit our Choosing a Tax Return Preparer page first.
- If your income is below a certain level, you may qualify for Low Income Taxpayer Clinic (LITC) representation.
Releasing a Lien
The IRS will release the lien once you pay the debt - either in a lump sum or over time. However, if the IRS releases a lien, it remains on your credit report for many years. A lien withdrawal, discussed below, however, removes the lien from your credit report.
Withdrawing a Lien
If the Notice of Federal Tax Lien (NFTL) included on your credit report is causing you a problem, you can apply to have the notice withdrawn if you meet any of the criteria listed below. This means it’ll be removed from your credit report, as if the lien had never occurred.
The IRS may withdraw a NFTL if:
- You’ve entered into a payment agreement to satisfy the tax liability, unless the agreement provides otherwise.
- For certain types of taxes, the IRS will routinely withdraw a NFTL, if you enter into a direct debit installment agreement and meet certain other conditions. You can get more information from the IRS representative when setting up your agreement.
- By withdrawing the lien, it will help you pay your taxes more quickly.
- The IRS didn’t follow proper procedures.
- The lien was filed during a bankruptcy automatic stay period, when the IRS generally stops most collection activity, or
- It’s in your best interest, as determined by the Taxpayer Advocate and in the best interest of the government. For example, this could include when your debt is satisfied and you request a withdrawal.
- If you've paid your tax debt or fully paid your accepted Offer in Compromise and, if applicable, the outstanding amount of any related collateral agreement, and the lien was released, you can ask the IRS in writing to withdraw the lien. The IRS will generally do that, so long as:
- You've filed all required returns – individual, business, and information – for the past three years, and
- You’re current on your estimated tax payments and federal tax deposits, as applicable.
You can apply to have the lien withdrawn by using IRS Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (Internal Revenue Code Section 6323(j).
Other situations with liens that might apply to you
- A “discharge” removes the lien from specific property. For example, if you want to sell a certain piece of property that’s under a lien and intend to use part or all proceeds to pay your tax debt, you can apply for a Certificate of Discharge.
- See IRS Publication 783, Instructions on how to apply for a Certificate of Discharge From Federal Tax Lien.
- A “subordination” doesn't remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to obtain a loan or refinance a mortgage.
- See IRS Publication 784, Instructions on how to apply for a Certificate of Subordination of Federal Tax Lien.
Note: The IRS has several videos that relate to each topic that may be helpful to view in addition to the information shared here.
When the IRS files the Notice of Federal Tax Lien (NFTL) in the public record, it puts your creditors on notice that the IRS has a claim. The filing of the lien may limit your ability to get credit.
The lien attaches to all assets, personal or business, (such as real estate, securities, vehicles), as well as future assets acquired in the period of the duration of the lien.
The lien attaches to all business property and all rights to business property, including accounts receivable.
If you file bankruptcy, your tax debt and lien may continue after the bankruptcy.
Publication 594, IRS Collection Process
For a lien withdrawal:
- Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (Internal Revenue Code Section 6323(j)
For a lien discharge:
- Publication 783, Instructions on how to apply for a Certificate of Discharge From Federal Tax Lien
For a lien subordination:
- Publication 784, Instructions on how to apply for a Certificate of Subordination of Federal Tax Lien
For complex lien issues, including discharge, subordination, or withdrawal, you can contact your Collection Advisory Group office.
- Publication 4235, Collection Advisory Group Numbers and Addresses
For Appeals:
- Publication 1660, Collection Appeal Rights
Understanding a Federal Tax Lien
If you’re questioning whether your bankruptcy changed your tax debt amount, call IRS Centralized Insolvency Operation at (800) 973-0424.
Browse common tax issues and situations at Get Help.
If your IRS problem is causing you financial hardship, you've tried repeatedly and aren't receiving a response from the IRS, or you feel your taxpayer rights aren't being respected, consider contacting the Taxpayer Advocate Service (TAS).
You may be eligible for representation from an attorney, certified public accountant (CPA), or enrolled agent (EA) associated with a Low Income Taxpayer Clinic (LITC). LITCs also provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language.
