Can the IRS Put a Lien on My Property?

Claim of Lien Form

If you owe the IRS a federal tax debt that the government has reason to believe they won’t receive within the statute of limitations (10 years), a tax lien may be issued against you. Tax liens are a serious matter that can put your personal property, business property, and employment wages in jeopardy.

But you don’t have to panic if it happens to you—resolving a tax lien can happen in a few different ways. And, you can prevent it from happening again in the first place by knowing what to do when you owe the IRS a considerable debt. Keep reading to learn more about property liens and how to settle them with the IRS.

What is a property lien? 

A tax lien is a document that goes to the county government, usually where you work or live, that notifies the public you have unpaid federal tax obligations. Liens can be attached to the taxpayer’s real estate property or personal property. Your property serves as collateral if you choose to ignore or refuse to pay your tax debt.

Liens record the full amount owed to the IRS that you’re required to pay. It’s important to know the distinction between a lien and a levy, which are sometimes used interchangeably. Liens are filed by the IRS in order to protect the government’s right to satisfy an outstanding tax debt. In contrast, a tax levy is when the government takes matters into its own hands and seizes money or property directly, sometimes straight from a bank account or through wage garnishment.

You’ll only be notified of a tax lien after it’s already been filed. The IRS sends taxpayers an official Notice of Federal Tax Lien. These liens go into effect 10 days after the IRS issues a record of an existing debt obligation.

What types of property can the IRS put a lien on? 

A lien can affect different types of property in addition to your wages and bank accounts. Liens can affect types of properties and assets:

  • Business property: The IRS lien can attach to all business property and all rights to your business property. 
  • Credit: Once a lien is issued, your ability to acquire credit is hindered. 

Assets: A lien is applied to all of your assets, including your personal property, any securities, vehicles, and any future assets you acquire for the entire duration the lien is active. A lien on inherited property or soon-to-be inherited property can occur as well.

How to Avoid a Property Lien

To prevent a lien on your property from occurring in the first place, you should always aim to pay your taxes in full. But if you can’t do that due to surprise expenses or other unforeseen circumstances, you also have the option to set up a payment plan with the IRS. If you’re in a tax installment plan that meets IRS guidelines, you can break up your tax debt into smaller payment chunks. An installment plan can make it much easier to pay down your balance without negatively impacting your personal cash flow.

If you enter into an installment plan, the IRS won’t file a tax lien. Tax debts of $10,000 or less allow you to enter into a guaranteed installment agreement. And tax debts of $25,000 or less allow you to enter into a streamlined installment agreement. To use either of these installment plans, you’ll need to contact the IRS directly.

What happens if you owe more than $25,000? In an ideal world, you’ll pay down the tax debt until it’s $25,000 or less, so you can qualify for a streamlined installment agreement. If you choose to do nothing at all, you can be vulnerable to tax penalties and an IRS lien on your property.


How to Get Rid of a Property Lien

If you Uncle Sam money and the IRS has issued a tax lien, there are a few different ways you can resolve it.

Use Your Home Equity to Pay Taxes

One way to settle your tax lien is to use your home equity to pay your debt when you refinance your mortgage. In some cases, the federal government will sometimes allow other creditors to move ahead of the IRS – but it doesn’t eliminate the lien. This is known as “subordinating” the lien. You’ll have to notify the IRS that you want to use the savings from your new mortgage or cash from your home equity to pay your debt.

It’s also important to note that when you have a lien on your house, it can make getting approved for refinancing more difficult.

Pay Your Tax Debt in Full

Paying your tax debt in full is the easiest, most efficient way of getting rid of a tax lien. The IRS will remove the lien within 30 days of the debt resolution. With that said, the record of your tax lien will be on your credit history for the next seven years.

Get a Lien Withdrawal

A withdrawal of the lien eliminates the Notice of the Federal Tax Lien and shows that the IRS isn’t going up against other creditors for your property. Unfortunately, you’re still liable for your tax debt even with a lien withdrawal. You can only get approved for a Withdrawal of Federal Tax Lien if the debt is paid in full. It’s the taxpayer’s responsibility to follow up with credit bureaus once the lien has been released.

Takeaways: Resolve Your Property Lien with the IRS

If you’re dealing with an IRS lien on your property, it can be intimidating to deal with the issue and navigating the intricacies of the IRS website by yourself. Luckily, Community Tax is here to assist with our tax lien help. Our team of tax professionals can help you enter into an IRS Tax Hardship Plan on your behalf and help you avoid future tax issues.