IRS Tax Liens

A federal tax lien is the government’s legal claim against your property when you owe tax and haven’t paid it after the IRS has billed you. It attaches to everything you own, including your home, your car, your financial accounts and your business assets, and to property you acquire while it’s in place. The IRS makes the lien public by filing a Notice of Federal Tax Lien, and that public notice is what lenders, title companies and buyers see.

A lien isn’t a seizure. Nothing is taken. But it can block a sale or a refinance, and it stays until something removes it. There are four ways that happens, and which one fits depends on what you’re trying to do.

A lien is not a levy

People often use the two words interchangeably, but they’re different. A lien is a claim that secures the debt. A levy is the actual taking of property, such as money from a bank account or part of a paycheck. A lien can be in place for years without a levy, and a levy can happen without a lien having been filed. Tax liens and levies, what’s the difference covers it in more depth, and our IRS tax levy page explains levies.

Release

The IRS releases a lien once the debt is paid in full or is no longer legally enforceable, for example when the collection period has run out. It’s required to issue a Certificate of Release within 30 days after that. A released lien remains on the public record as released.

Withdrawal

A withdrawal goes further than a release. It removes the public Notice of Federal Tax Lien as if it had never been filed. You request it on Form 12277, and the IRS can approve it in specific situations. One of the most common is a direct debit installment agreement. If you owe $25,000 or less (paying the balance down to that level first is allowed), the agreement will pay the debt in full within 60 months or before the collection period ends, you’re current on filing, and you’ve made three consecutive direct debit payments, you can ask for the lien notice to be withdrawn.

Discharge

A discharge removes the lien from one specific piece of property, most often so a house or other asset can be sold with a clear title. You request it on Form 14135. The IRS generally expects to receive its share of the sale proceeds.

Subordination

Subordination doesn’t remove the lien. It lets another creditor’s claim move ahead of the IRS’s, so a lender is willing to refinance or extend credit. You request it on Form 14134, and the IRS approves it when doing so helps it collect the tax, for example when a refinance produces money that goes toward the debt or lowers your payments enough to fund an agreement.

What a lien does to a sale or refinance

Federal tax liens no longer appear on consumer credit reports from the major credit bureaus, but the notice is still a public record. A title search will find it, and most lenders won’t close until the lien is released, discharged or subordinated. If you have a closing date coming up, call us early, because each of these requests takes time for the IRS to process.

How we resolve IRS tax liens

We start with your IRS transcripts to confirm which balances the lien secures and when the collection period ends. Then we work toward the option that matches your goal: an arrangement that supports a withdrawal, a discharge for a sale, a subordination for a refinance, or a full resolution that ends in release. If the lien was filed recently, you may also have the right to a hearing. See collection appeals. Many lien withdrawals start with an IRS installment plan.

New York State tax warrants

New York State handles unpaid state tax differently. The Department of Taxation and Finance files a tax warrant, which is the equivalent of a civil judgment. It’s filed with the NYS Department of State and the county clerk, becomes a public record, and creates a lien against your real and personal property. Read tax warrant vs. tax lien for the differences, and steps to remove a New York tax warrant if that’s what you’re facing.

Questions people ask about IRS tax liens

Can you get out of a tax lien?

Yes, through one of the four routes above. Paying or otherwise resolving the debt leads to a release. A withdrawal removes the public notice. A discharge frees a specific property, and a subordination lets a lender go first. Which one is realistic depends on your balance and your plans for the property.

How much do you have to owe the IRS before they put a lien on you?

The lien arises legally on any unpaid assessed balance after the IRS sends a bill. Under IRS procedures, the public notice generally isn’t filed when the unpaid balance is under $10,000, though the IRS can still file one to protect its interest, for example before a bankruptcy. If you have a balance, assume a filing is possible, and work on an arrangement before it happens.

What happens if you owe the IRS more than $25,000?

Larger balances limit some of the simpler payment options and make a lien filing more likely. An installment plan is still possible, and paying the balance down to $25,000 or less can open the door to a lien withdrawal through a direct debit agreement.

If a federal tax lien is holding up a sale or refinance, or you’ve just received a lien notice, call Fine & Clear Tax Solutions at 516-209-2594 or request a free consultation.