Federal and State Tax Liens 


If you owe money because of certain delinquent debts, the IRS and State tax agencies can file LIENS that will encumber your real and personal property. 

Taxpayers are often surprised that they are unable to sell a house when the title company finds a tax lien recorded. The lien must be released, subordinated or discharged before the sale can go through.

Below is a link to the IRS website with videos that discuss the process to resolve a lien on real property to facilitate a sale.

http://www.irsvideos.gov/Individual/IRSLiens

The following information on the Federal tax lien is from the IRS website, and is reprinted for your convenience.

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Notice of Federal Tax Lien
 

Liens give us a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:

We assess the liability;

We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and You neglect or refuse to fully pay the debt within 10 days after we notify you about it.

Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).

Caution!

Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.

Releasing a Lien

  • We will issue a Release of the Notice of Federal Tax Lien:

  • Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or

  • Within 30 days after we accept a bond that you submit, guaranteeing payment of the debt.

In addition, you must pay all fees that a state or other jurisdiction charges to file and release the lien. These fees will be added to the amount you owe. Refer to Publication 1450, Request for Release of Federal Tax Lien (PDF).

Usually 10 years after a tax is assessed, a lien releases automatically if we have not filed it again. If we knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government, but not IRS employees, for damages.

Payoff Amount

The full amount of your lien will remain a matter of public record until it is paid in full, including all accruals and additions. However, at any time you may request an updated lien payoff amount to show the remaining balance due by calling the toll-free customer service telephone number at 1-800-913-6050. An IRS employee will issue you a letter with the current amount that must be paid before we release the Notice of Federal Tax Lien.

Applying for a Discharge of a Federal Tax Lien

If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien (PDF).

Making the IRS Lien Secondary to Another Lien

In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Refer to Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien. (PDF)

Withdrawing Liens

By law, a filed notice of tax lien can be withdrawn if:

  • The notice was filed too soon or not according to IRS procedures,

  • You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),

  • Withdrawal will speed collecting the tax, or

  • Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.

We will give you a copy of the withdrawal, and if you write to us, we will send a copy to other institutions you name.

Lien Inquiries

If you have questions regarding basic lien inquiries such as routine lien releases and lien payoff amounts, contact the Centralized Lien Unit by calling the toll free telephone number (1-800-913-6050).

When faced with a complex lien issue, consider contacting the Collection Technical Services (TS) Advisory function. TS Advisory is a collection compliance function that interacts with taxpayers on complex lien issues such as: Certificate of Discharge, Subordination, Subrogation, Non-Attachment, Withdrawal and other complex lien issues. Publication 4235, Technical Services Advisory Group Addresses (PDF) should be used to locate the appropriate office to contact for assistance.

Appealing the Filing of a Lien

The law requires us to notify you in writing not more than 5 business days after the filing of a lien. We may give you this notice in person, leave it at your home or your usual place of business, or send it by certified or registered mail to your last known address. You may ask an IRS manager to review your case, and you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice. You must file your request by the date shown on your notice. Some of the issues you may discuss include:

  • You paid all you owed before we filed the lien,

  • We assessed the tax and filed the lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,

  • We made a procedural error in an assessment,

  • The time to collect the tax (called the statute of limitations) expired before we filed the lien,

  • You did not have an opportunity to dispute the assessed liability,

  • You wish to discuss the collection options, or

  • You wish to make spousal defenses.


At the conclusion of your Collection Due Process hearing, the IRS Office of Appeals will issue a determination. That determination may support the continued existence of the filed federal tax lien or it may determine that the lien should be released or withdrawn. If you disagree with Appeal's determination, there is a 30-day period starting with the date of determination, in which you may request judicial review in a court of proper jurisdiction. Refer to Publication 1660, Collection Appeal Rights, for more information (PDF).

Revised 3/27/2011