Learn About Liens

A federal tax lien is a tool—some might call it a weapon—that the IRS has at its disposal. It’s a way for them to collect on people who have unpaid taxes. When a federal lien is field, it’s a matter of public record, which can be quite embarrassing. Furthermore, a lien can mean that the taxpayer could lose their property, which would be sold to pay the IRS what is owed.  

Hopefully, a lien is not something that you ever have to experience. Whether you do or not, however, it’s important to educate yourself on what liens are and how they work. That way, if you ever do face one or are in danger of facing one, you’ll understand what’s happening and what’s at stake.

Warnings and Notifications

Thankfully, a lien won’t just be sprung on you from out of nowhere. Instead, the IRS first has to send a Notice of Demand for Payment. This notice will tell you what you owe. This is your chance to get in touch with the IRS to work out a payment plan, offer in compromise, or some other option for paying your tax debt.

If you do nothing, then your next notice may be a Notice of Federal Tax Lien, which is the last thing you want.

Getting Out of a Lien

If a lien is filed against you, there’s still hope. You can show that the lien was filed in error, request an offer in compromise, or pay what you owe. The IRS will let you know your options if you communicate with them. However, it’s much better to work something out before a lien ever happens if you can. Once the IRS has a lien in effect, they can sometimes be reluctant to offer other options.

The Bottom Line

The best way to avoid a federal tax lien is to pay your taxes! If you ever can’t do that, then work with the IRS and, ideally, a tax professional to work out some kind of payment plan or other option for getting your taxes paid. Never ignore a tax issue. If you do, then you could find yourself facing a federal tax lien or other collections enforcement actions from the IRS.