If you receive notice that the Internal Revenue Service (IRS) has filed a lien against your property, you may be wondering what a lien is and what the lien means for you.
A lien is the granting of an interest in a property to secure the payment of a debt that is owed by the property owner. One of the commonly used forms of a property lien is a mortgage, which is an interest that the lender holds in the property that was purchased with the money the lender loaned to you. When a property with a lien is sold, it guarantees to the lienholder that they will be paid out of the proceeds from the sale of the property up to the value of the lien.
When the IRS files a lien against your property, it generally means that you have an unpaid income tax liability that you owe to the IRS. The IRS is using the lien to secure its interest in your property to increase the likelihood that you will have to pay the tax liability at some point in the future. The IRS may take out a lien against your property if they have previously sent you a request to pay the outstanding tax liability but you have failed to respond to the requests. The IRS may also file a lien against your property if you have agreed to a payment plan with the IRS, such as an offer in compromise, but the payment plan has not yet been completed. In this case, the IRS is using the lien to help motivate you to fulfill your obligations under the agreed-upon payment plan, as they will only release the lien once you have completed the agreement.
A property lien filed by the IRS generally gives the IRS ten years to collect the tax liability. During this time, the IRS can seize and sell your property to collect proceeds to pay off the tax liability. The definition of property as it relates to a property lien filed by the IRS is very broad. It includes not only real estate but also personal property such as cars, trucks, boats, bank accounts, wages, and interest. Even if you acquire property after the lien was filed, the lien will attach to that property as well. In general, if you have an asset with value, the IRS can seize it and sell it.
There are only a few types of property that the IRS may not seize related to a tax lien:
Personal residence. While the IRS technically can seize your personal residence to help satisfy a tax liability, they generally will not unless it is an exceedingly flagrant case of non-payment.
Property without any value. In general, if a piece of property has more than one lien against it, the liens are satisfied in the order they were attached to the property. That is, the first lien will be satisfied first, the second lien will be satisfied second, etc. This holds true for tax liens as well. Therefore, if you have a home worth $250,000 but have a mortgage for $225,000, the IRS will not seize your home because the $25,000 difference would be wiped out by the time the IRS reduces the sale price of the home sufficiently for it to sell.
Interest of an Indian in restricted land. The only piece of property that is technically exempt from a federal tax lien is land held in a trust by the United States for a Native American Indian.
As you can see from the information above, the filing of a lien by the IRS is a serious matter and it gives them a lot of power to attempt to recoup the tax liability they are owed.
What should I do if the IRS has filed a lien against my property?
If the IRS files a lien against your property, you should seek professional help from a tax attorney. A tax attorney can help you negotiate a payment plan with the IRS in an attempt to stop the IRS from seizing and selling your property.
If you complete the short form below, a tax attorney will review your situation free of charge and with complete confidentiality. As this review does not obligate you to anything further, please take a few minutes to get help today in dealing with the IRS.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.