Received an IRS Tax Lien Notice? Don’t Panic

As IRS Tax Attorneys, our tax law firm regularly receives telephone calls from someone who thinks the Internal Revenue Service (IRS) is about to seize their home for an IRS tax debt that they owe. While real property seizures do happen, further inquiry usually reveals that the person calling received a notice of Notice of Federal Tax Lien; not a property seizure action. Federal tax liens are sometimes also confused with a tax levy or property seizure, and can be a pretty scary notice if you don’t understand what a tax lien is; and more importantly, what it is not. Fortunately we provide IRS Tax Lien Help. A tax lien is the operation of law that secures the government’s legal claim against your property when you fail to pay a tax debt. The Notice of Federal Tax Lien is the operative document that is filed with the county and notifies the public and creditors of your tax debt. A tax lien attaches to a person’s property, both real property and personal property.

The end result of a tax lien is when property is sold. If property subject to a tax lien is sold, the IRS will generally receive the sales proceeds before the seller receives any money from the sale. Therefore, the filing of a tax lien is what is considered a passive collection tool used by the IRS because there is no immediate monetary deprivation to the taxpayer. The passive nature of a tax lien may be contrasted to an enforced IRS collection tool, such as a bank levy, which may result in the seizure of funds on deposit in the target bank account and has an immediate monetary impact on the taxpayer.

The notice of federal tax lien has the effect of notifying the public that you owe a tax debt, even if you don’t own real property. This means that once a Notice of Federal Tax Lien is filed, it is a matter of public record and will likely be included as a derogatory debt on your credit report and lower your credit score. Derogatory debts and lower credit scores limit your ability to get credit and make financial transactions more difficult, or at the very least more costly. Unlike other types of debts shown on a credit report, the tax lien is filed and reported based on the tax debt owed at the time the Notice of Federal Tax Lien is actually filed and is not periodically updated based on the running balance owed. Therefore, even if you’re making payments to reduce your tax debt over time, for example, the debt is not reported publicly as being lowered.

Now that you understand the passive but derogatory effects of a tax lien, you are better informed of the IRS’ bag of collection tricks in the event you owe a tax debt. As with any tax debt situation, early attention and resolution will often render a more positive result than procrastination. This is true with resolving tax liens; it is easier to prevent a Notice of Federal Tax Lien from being filed by negotiating with the IRS once a tax debt is anticipated, than it is to remove a Notice of Federal Tax Lien and repair its damage.