Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Personal Finance Tax Relief What Is a Tax Lien? Updated Apr 19, 2024 10-min read Expert Approved Expert Approved This article has been reviewed by a Certified Financial Planner™ for accuracy. Written by Melody Stampley Written by Melody Stampley Expertise: Writing, editing, budgeting, credit, loans, mortgages, auto insurance, giving, saving Learn more about Melody Stampley Reviewed by Erin Kinkade, CFP® Reviewed by Erin Kinkade, CFP® Expertise: Insurance planning, education planning, retirement planning, investment planning, military benefits, behavioral finance Erin Kinkade, CFP®, ChFC®, works as a financial planner at AAFMAA Wealth Management & Trust. Erin prepares comprehensive financial plans for military veterans and their families. Learn more about Erin Kinkade, CFP® One of the most crucial actions you must take as a taxpayer is to pay your taxes as soon as you can. If you don’t, major consequences, such as a tax lien, could be in store. We’ll explain what a tax lien is, how it can affect you, and how to get rid of it. Table of Contents Skip to Section What is a tax lien?What’s the difference between a federal tax lien and a state tax lien?How does a tax lien affect me?How do I know if a tax lien has been issued against me?More about tax liens What is a tax lien? A tax lien is a legal claim made by a governmental agency that’s placed on someone’s property due to unpaid taxes. Basically, it establishes the government’s interest in your property to ensure it collects the taxes you owe. What’s the difference between a federal tax lien and a state tax lien? A federal tax lien is a legal claim placed on your property by the IRS. A state tax lien is a legal claim placed on your property by the tax authority in your state, such as the Florida Department of Revenue, Texas Comptroller of Public Accounts, or Delaware Department of Finance. The main difference between a federal and state tax lien lies in the type of property each governing authority can place a lien on. FederalStateIssuing entityIRSState agency equivalent to IRS (Dept. of Revenue, Dept. of Finance, or Comptroller)Taxes owedFed. income, estate, gift, & excise taxesState income, sales, property, & othersJurisdictionAcross the U.S.Within your statePropertyReal estate, personal property (car or boat, wages), & bank accountsReal estate property within the state & wages How does a tax lien affect me? If you receive a Notice of Federal Tax Lien for unpaid taxes, the IRS is informing you of its intent to place a lien on your property. Although they won’t show up on your credit report, tax liens can still prevent you from getting approved for credit. A lien on real estate property, for instance, is public record. So lenders, institutions, and even potential employers could easily find this information online. A lien by the federal or state government could prevent you from selling or transferring ownership of your property. If you choose to sell your property, the government will deduct the amount needed to satisfy the tax debt from the proceeds of the sale. There are a couple of other differences between how federal and state tax liens can affect you: Federal tax liensState tax liensGenerally take priority over all other liens (Exceptions are in the Internal Revenue Code)Usually only take priority if filed prior to another lien, e.g., by a mortgage lenderMay lead to seizure of personal property or garnishment of wagesMay lead to seizure of real estate property or garnishment of wages How do I know if a tax lien has been issued against me? The IRS is required to notify you by written notice—a Notice of Federal Tax Lien (NFTL)—that it is placing a federal tax lien on your property. Each state’s laws and regulations determine the exact procedures, but you should receive a written notice in the mail, similar to the NFTL, about a state tax lien. The notice you receive in the mail might look like either of these: Federal and state tax lien notices include details about the property a lien has been assessed on, the taxes you owe, and instructions for paying. Whether federal or state, a lien won’t be placed on your property without you being made aware of it—and not before notifying you multiple times of overdue taxes and ways you can make payment. If you haven’t received a written notice in the mail and are concerned about a lien, you can check in the following ways. Federal tax liensState tax liensCall the IRS’s Centralized Lien Operation department at 800-913-6050, or e-fax 855-390-3530Call the appropriate department within your stateSign in to your online IRS accountSign in to your account online from the state tax authority’s websiteSearch public records, such as your property appraiser websiteSearch the state tax authority’s public database or public county records. Our expert warns: Be wary of fraud Erin Kinkade CFP® The IRS will not call you. It will only contact you by mail. Be cautious of fraudulent attempts made via phone to scare you into paying money to somebody who says you owe taxes. What do I do if a tax lien was issued in error? If you think a tax lien was issued by mistake, you can appeal or dispute it by Collection Due Process (CDP) or Collection Appeal Program (CAP). CDPCAPComplete & submit Form 12153 (call 1-800-829-3676, or visit the IRS website) within 30 days, or call the number on your notice. (If no number is listed, call 1-800-829-1040)Call the number on your notice, explain what you disagree with and why, and offer a solution to your tax problemInclude a copy of your lien noticeIf no agreement is reached, request to speak with a manager; explain what you disagree with and whyList the taxes and tax periods included on your notice that you’re appealingIf an agreement isn’t reached, your case will be forwarded to Appeals for review Because each state has its own laws and regulations, the steps to appeal depend on the state you live in. However, some state tax authority websites allow you to file an appeal online. Others may provide instructions in the notice you received with a number to call or an office to send a letter to. How long does a tax lien last? Technically, a federal or state tax lien stays on your property until you pay the taxes owed in full. But federal law prevents the IRS from collecting federal taxes you owe after 10 years. It’s called the Collection Statute Expiration Date (CSED). Generally, your lien would be released after 10 years. However, several exceptions to the CSED could extend it, including but not limited to: Installment agreementBankruptcyOffer in CompromiseCDP hearing How long a state tax lien can remain on your personal property depends on your state’s laws. For example, it can remain for 20 years in Illinois but 10 years in Georgia. How do I get rid of a tax lien? To get rid of a state tax lien, visit your state tax authority’s website. The steps to get rid of your tax lien will vary by state, and you can learn about them by contacting someone at the number or address on the notice you received or by going online. The easiest way to get rid of your state tax lien is to pay the taxes you owe if you can. If you can’t afford to pay your taxes, a payment plan may be available. Check with your state tax authority. Here are the options to get rid of a federal tax lien. Click the option in the table to find out more about how it works. Option Best forPay your taxesPaying taxes owed quicklyOffer in CompromiseSettling to pay a lesser amount if you can’t afford to pay off the entire balanceDischargeSelling or refinancing your home (because selling or refinancing a home with a tax lien is difficult)SubordinationGetting a loan or refinancing to pay your taxesWithdrawalRemoving the NFTL from public records while you pay off the taxes within 5 years or otherwise agreed term Pay your taxes This is the most straightforward way to get rid of a tax lien. How it works You can pay in full or explore an installment agreement. Offer in Compromise An Offer in Compromise is an agreement between the taxpayer and the IRS where the IRS agrees to settle the taxpayer’s debt for less than the amount owed. This option is generally available to taxpayers unable to pay their full tax liabilities or when doing so creates financial hardship. How it works Follow the instructions in Form 656-B, Offer in Compromise Booklet. Contact Call 800-829-1040. Discharge A discharge removes the lien from a specific property, allowing for its transfer or refinancing without the lien, while the lien remains on other assets owned by the taxpayer. It is most often used when selling or refinancing property. How it works Follow the instructions in Publication 783, Certificate of Discharge of Property From Federal Tax Lien. Contact Reach out to Advisory Consolidated Receipts, 7940 Kentucky Drive, Stop 2850F, Florence, KY 41042. Contact this department by phone at 859-594-6090, or fax 844-201-8382. Subordination This does not remove the lien but allows other creditors to move ahead of the IRS in priority, which can make it easier for the taxpayer to get a loan or mortgage. Subordination can be beneficial in refinancing or restructuring debt. How it works Follow the instructions in Publication 784, How to Prepare an Application for a Certificate of Subordination of Federal Tax Lien Contact Reach out to Advisory Consolidated Receipts, 7940 Kentucky Drive, Stop 2850F, Florence, KY 41042. Contact this department by phone at 859-594-6090, or fax 844-201-8382. Withdrawal This removes the public NFTL and assures that the IRS is not competing with other creditors for the taxpayer’s property; however, the taxpayer is still liable for the amount due. This option is often used to improve the taxpayer’s credit score or facilitate financial arrangements unaffected by a lien. How it works Follow instructions in Form 12277, Application for Withdrawal of Filed Form 668(Y), NFTL Contact Reach out to Advisory Consolidated Receipts, 7940 Kentucky Drive, Stop 2850F, Florence, KY 41042. Contact this department by phone at 859-594-6090, or fax 844-201-8382. A tax lien on your property can be scary, but it’s not too late to right the ship. As you can see, you have several options to resolve your situation. Just make sure you take the steps that apply to you as soon as possible. What happens if I ignore a tax lien? If you choose to ignore a tax lien, you could face serious consequences for failing to pay—or make arrangements to pay—off your tax debt: FederalStateTax levy: Seizure and sale of real estate or personal property, such as bank accounts, cars, and wagesTax levy: Seizure and sale of real estate or garnishment of wagesCriminal charges: For tax fraud or tax evasionLicense revocation: Driver’s license or professional licenses The ramifications vary from state to state, so some of these consequences may not be the case where you live. But you can count on harsh penalties you’d much rather avoid. There are few permissible ways to avoid federal or state taxes. So the best decision is to pay them whenever and however you can, whether through a payment plan, offer to settle, or other agreement. Don’t let a bad situation turn into a worse one by ignoring your tax lien. In general, the IRS and state tax authorities are willing to cooperate with you if you’re willing to cooperate and be honest. Constant and timely communication is often the best way to avoid life-altering consequences that could take years to work your way out of.