Tax Lien Status Explained

The IRS may impose a federal tax lien on a taxpayer's property in order to satisfy tax debt owed to the IRS. The lien may be automatically released within 10-years if the IRS decides to forego refiling.

Identification

A Notice of Federal Tax Lien is sent to the taxpayer after the IRS has assessed the debt liability, sent the Notice and Demand for Payment--a bill reflecting the past due amount--and the debt has not been paid within 10-days of the Demand.

Effects

If the taxpayer does not satisfy the outstanding tax debt, then the Notice of Federal Tax Lien is sent to creditors to establish the IRS' super-priority lien status when other creditors have filed liens or the property is subject to a bankruptcy order. The federal tax lien is attached to all property rights, including cars and homes.

Prevention/Solution

If the taxpayer subsequently pays off the federal tax bill or produces a bond guaranteeing payment, then the IRS may issue the Release of the Notice of Federal Tax Lien within a 30-day period. The taxpayer may have recourse against the federal government if it fails to release the lien after the taxpayer has fully satisfied the lien amount.

Warning

Laws frequently change. When faced with a tax lien it is a good idea to seek the advice of an attorney licensed to practice in your jurisdiction.

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