Notice of Federal Tax Lien

What is a federal tax lien?

A Notice of Federal Tax lien is public notice that you owe the IRS money.

A Notice of Federal Tax Lien will be issued by the IRS when a back tax liability goes unpaid. The IRS has the right to file a Federal Tax Lien anytime that you owe more than $10,000 and have not paid the balance due after their first demand for payment. Once a Notice of Federal Tax Lien is filed, your tax problems become a matter of public record. Anyone that is considering doing business with you -- banks, vendors, and customers -- will now know that you are behind on your taxes, which may influence their business decisions.

A Notice of Federal Tax Lien makes the IRS a secured creditor by giving them a legal right to all of your assets. This means that if you want to sell an asset, you will have to pay the IRS the amount of their claim in the property in order to discharge the lien and transfer the asset with a clean title.

How does a federal tax lien work?

A Notice of Federal Tax Lien attaches to anything you own now or acquire in the future. Including your home, vehicles, equipment, bank accounts, stock, accounts receivable, inheritances, etc. The list is endless -- it literally attaches to all property and rights to property, now and in the future.

For instance, if you own a home with equity an IRS tax lien will attach to that equity and when you sell or refinance your home the IRS is going to either be paid in full or refuse to discharge their tax lien. If the IRS files a tax lien and you then inherit a house, the lien automatically attaches to it -- and to any other property that you acquire in the future.

Will a Notice of Federal Tax Lien show up on my Credit Report?

A Notice of Federal Tax Lien will appear on your credit report driving your credit score down and making it difficult, if not impossible, to get a loan. Even after you pay a lien and the IRS releases the lien, it will continue to appear on your credit report. While it will show on your credit card as "released" or "satisfied", a Notice of Federal Tax Lien remains a part of your credit report for seven years from the date that it was released (not from when it was filed!).

If you have the ability to do so, it is always a good idea to avoid a Federal Tax Lien. If you can get a loan to pay your taxes, it is best to do so now before the lien affects your credit score. A good goal may be to get a loan to pay your total balance to the IRS under the $10,000 threshold so that they will not file a lien against you.

In many cases, though, a lien is inevitable. If you cannot pay your debt fairly quickly there is little that can be done to stop the IRS from filing a lien.

I’ve been contacted by other Tax Resolution Companies Who Promise They Can Release the Lien

A Notice of Federal Tax Lien is a public record available to anyone who goes looking for it, and many companies in our industry employ large call centers that cold-call anyone and everyone with a Federal Tax Lien. Many of these companies are known to have questionable business practices.

Before doing business with these tax companies we strongly encourage you to visit the Better Business Bureau at www.bbb.com as well as www.Ripoffreport.com. Be wary of anyone promising a quick and easy IRS Tax Lien Release.

In short, though, it is extremely rare to get a Federal Tax Lien released once it has been filed. If you are basing your decision to hire someone on a promise that they are going to remove the tax lien, you will probably be disappointed to learn that they are unable to do so.

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Colonial Tax Consultants, LLC

425 S Cherry St, Suite 430

Denver, Colorado 80246
Phone: (303) 573-3755