Tax Liens Explained: How They Work, How They Affect You, and How to Remove One

A tax lien is more than just a financial red flag—it’s a legal claim that can affect your ability to sell property, secure loans, or even manage your personal finances. If you have an unpaid tax debt, the government can place a lien on your assets, ensuring it gets paid before you can sell or refinance.

Federal tax liens can last up to 10 years, while state rules vary. But don’t panic—there are ways to resolve and remove a tax lien. In this guide, we’ll break down exactly what a tax lien means, how it affects you, and the steps to get rid of it.

Table of Contents

1. What is a tax lien?
2. How long does a tax lien last?
3. Federal tax liens
   1. How do I get rid of one?
4. State tax liens
   1. How do I remove one?
5. How to appeal a tax lien
6. What happens if I ignore a tax lien? 
7. How to prevent a tax lien
8. FAQ

What is a tax lien?

A tax lien is a legal claim placed on your property by the government when you fail to pay taxes. It serves as public notice of your debt and gives the government the right to seize and sell your assets if the balance remains unpaid.

Tax liens can apply to homes, vehicles, and other valuable assets. While they don’t mean immediate seizure, they put you at risk if left unresolved. A lien can also hurt your credit, making it harder to get loans. In short, it’s the government’s way of ensuring it gets paid—one way or another.

Many believe a property can’t be sold with a tax lien, but it often can—as long as the lien is paid, ideally from the sale proceeds. Tax liens come in federal, state, and local forms, each handled differently. Another misconception is that liens disappear once taxes are paid. In reality, you must request removal from public records, even if the debt is settled.

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How long does a tax lien last?

The duration of a tax lien depends on the type and location. Federal tax liens last 10 years, as the IRS has a 10-year statute of limitations on tax collection. If the debt isn’t paid within this time, the lien expires—unless extended through legal action, such as an installment agreement or bankruptcy filing.

State tax liens vary, typically lasting five to 20 years. Some states allow renewal, prolonging the lien.

A lien remains until:

1. The debt is paid.
2. The tax authority releases or withdraws it.
3. The statute of limitations expires.

However, an expired lien doesn’t erase the debt—the government can still garnish wages or seize assets. Address liens promptly; they can hurt credit and block property sales or refinancing.

Employers often check credit and background records, including tax liens. An unpaid lien—or even a paid one still on public record—could affect hiring decisions. It’s best to be upfront with potential employers to explain your situation. Whether a lien affects professional licensing depends on the specific requirements of the licensing agency.

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Federal tax liens

A federal tax lien is issued by the IRS when you owe unpaid taxes. The process follows these steps:

1. The IRS assesses your tax liability.
2. You receive a Notice and Demand for Payment.
3. If unpaid, the IRS places a lien on your assets.

What happens if the IRS places a lien on me?

An IRS lien can:

• Attach to all your property, including real estate, vehicles, bank accounts, and future assets.
• Affect your credit if a public Notice of Federal Tax Lien is filed.
• Extend to business property and accounts receivable.
• Lead to a tax levy, forcing asset sales to pay your debt.

How do I know I have a federal tax lien?

A lien occurs automatically if you ignore a tax Notice and Demand for Payment. If filed publicly, you’ll receive Letter 3172, notifying you of the lien and appeal rights.

How do I get rid of a federal tax lien?

The IRS releases liens within 30 days of full payment. If that’s not possible, consider the following options to get rid of your tax lien:

• Installment Agreement. Pay in monthly installments.
• Offer in Compromise. Settle for less than the full amount.
• Appeal. Dispute the lien if incorrect.

If you’re overwhelmed or struggling to negotiate with the IRS, a reputable tax relief company—Anthem Tax Services is our top choice—may be worth considering. Anthem specializes in tax resolution, helping taxpayers remove liens, negotiate settlements, or set up payment plans. This can be especially helpful if you:

• Owe a large tax debt and can’t afford to pay it off.
• Are facing IRS enforcement actions, such as levies or garnishments.
• Need help filing for an Offer in Compromise or securing lien removal.

Anthem Tax Services employs enrolled agents and tax attorneys who work with the IRS on your behalf. While tax relief services come with a cost, they can be valuable if you need expert guidance to resolve your lien.

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How to Stop or Release a Tax Levy

State tax liens

States can issue tax liens for unpaid income or property taxes. Each state determines:

• When liens are issued and how taxpayers are notified.
• Remedies available to resolve the lien.
• How long the lien lasts (e.g., in California, liens last up to 10 years).

What happens if I have a state tax lien?

Like federal tax liens, state liens:

• Attach to all current and future property.
• Appear in public records, affecting credit and job prospects.
• Can make buying, selling, or refinancing property difficult.

How do I know if I have a state tax lien?

If you’ve ignored tax notices, a lien may have been issued. You can check records with:

• County recorder or treasurer
• Register of deeds
• Secretary of state

How do I remove a state tax lien?

The best way is to pay the debt in full. If that’s not possible, your state may offer a payment plan. Contact your state’s tax agency or county tax office to explore options.

How to appeal a tax lien

You can appeal a federal or state tax lien, but deadlines apply, so act fast.

Federal tax lien appeals

• Form 9423: Disputes a proposed lien or denial of lien removal.
• Form 12153: Requests a hearing if the IRS is moving forward with a lien or levy.

A Collection Appeals Request (CAP) is often faster than a Collection Due Process (CDP) hearing and can pause IRS actions. State appeal rules vary, so check with your state’s tax agency.

What happens if I ignore a tax lien? 

Ignoring a tax lien can lead to:

• Mounting penalties and interest. Increasing your total debt.
• Wage garnishment. The government can take part of your paycheck.
• Asset seizure. The IRS or state may seize property to satisfy the debt.
• Credit and borrowing issues. While tax liens no longer appear on credit reports, lenders check public records.
• Legal action. The government can file lawsuits or expand liens to other assets.

To avoid severe consequences, address a lien as soon as possible.

How to prevent a tax lien

To avoid a tax lien:

• File taxes on time. Even if you can’t pay in full.
• Set up a payment plan. The IRS and states allow installment agreements.
• Request an Offer in Compromise. Settle for less if you qualify.
• Communicate with the IRS or state. Ignoring notices worsens the situation.

Taking these steps reduces your risk of a lien and helps keep your finances in check.

FAQ

Can tax liens be purchased?

Yes, tax liens can be purchased, but this typically applies to property tax liens issued by local governments rather than federal or state income tax liens. Many local governments sell tax lien certificates at auctions.

When you purchase a tax lien certificate, you’re essentially paying off the property owner’s unpaid taxes. The property owner then owes you the debt, along with interest, instead of the government. If the debt isn’t paid, you may eventually have the right to foreclose on the property.

How long can property taxes go without being paid?

The length of time property taxes can go unpaid before triggering a tax lien varies by state. Typically, if property taxes are unpaid for one to three years, a lien is placed on the property. After a lien is issued, the property owner must pay the back taxes, plus interest and penalties, to avoid further action like foreclosure.

Are liens public record?

Yes, tax liens are part of the public record. Once a lien is filed, it is recorded in public documents, and anyone—including lenders, potential buyers, or credit agencies—can access this information. This is one of the reasons tax liens can be so damaging to your financial reputation.

Can tax liens expire?

Yes, tax liens can expire. For federal tax liens, the IRS has a 10-year statute of limitations from the date the tax was assessed to collect the debt. If the IRS does not collect the debt within that period, the lien will automatically expire, unless the IRS extends the collection period through legal action. State and local tax liens may have different time frames, depending on the specific laws of each state.

What’s the difference between a tax lien and a tax levy?

A tax lien is a legal claim the government places on your property when you owe unpaid taxes, signaling that it has a right to your assets until the debt is paid. While it doesn’t mean immediate seizure, it affects your ability to sell or refinance property and can harm your credit. 

A tax levy, however, is a direct action where the government seizes your property, such as bank accounts, wages, or even physical assets, to satisfy the debt. A lien serves as a warning and claim, while a levy is the enforcement action that follows if the debt remains unresolved.