IRS Tax Liens

What Is a Tax Lien?

A lien is the IRS’ first major step in order to collect back taxes. The lien is filed county-by-county and will attach to all property you own in that county.

Why is a Tax Lien Filed?

The lien is filed to secure the IRS’ position as your creditor. A lien by itself does not mean that the IRS will be taking your money or assets, but it can ruin your credit and make it near impossible to buy a home.

The IRS has a policy of automatically issuing a lien if your debt exceeds $10,000. Mind you, the IRS still has the discretion to issue a lien below that limit.

When is a Tax Lien Filed?

The IRS first sends a letter with an assessment of your tax liability. If ignored, there will be four more letters.

You will then receive the Notice of Federal Tax Lien (NFTL). This means that a lien has already been attached to your property. Remember that liens are public record. Expect your credit card rates to go up.

Effects of a Tax Lien

In addition to ruining your credit, a lien can lead to a levy. A levy is bad. This is when the IRS seizes your assets. You probably have heard of bank levies, where the IRS takes the money in your bank account. There are also wage levies (also called garnishments), where the IRS will give you an allowance to live on and take the rest of your paycheck.

What to Do About a Tax Lien?

The first thing is: don’t stick your head in the sand! This will not go away on its own, unless you are willing to earn no money and accumulate no assets for years and years.

Second: do something! Doing nothing was not your best plan. Take the time to research and learn about IRS collections - or hire someone who practices in this area. If it is a CPA, please be aware that not all CPAs practice tax representation. Preparing a tax return is not the same as representing before the IRS.