IRS FEDERAL TAX LIEN

Starting in 2018, a federal tax lien no longer directly affects your credit score. However, a federal tax lien will still show up on title searches or public record searches, and comprehensive background checks.

A federal tax lien can stop you from buying a house, car, or any other type of loan.

Unless you both filed jointly for the tax debt, a federal tax lien does not typically affect your spouse’s credit worthiness. Find out more by reading IRS Publication 594.

The difference between a federal tax lien and a tax levy is that a lien is viewed as a way for the government to protect its financial interest by placing a legal claim on your assets, while a levy is when the IRS actually seizes your property to satisfy the debt. A levy is enforced under 26 U.S. Code § 6331 and allows the IRS to take your assets to settle the unpaid tax debt.

There are ways to avoid a federal tax lien, including filing your tax returns on time, paying your taxes in full, or setting up a payment plan with the IRS. The IRS could also waive a federal tax lien if you prove that you would lose your job if the lien were placed. Making a settlement offer, such as an Offer in Compromise, can also help prevent a lien from being filed.

To get a federal tax lien payoff amount, you can contact the IRS directly by calling the number on your Notice of Federal Tax Lien, calling 1-800-829-1040, or by submitting a written request to the address provided on the letter 3172, which you received. The federal tax lien payoff amount will be all-inclusive, breaking out the original tax debt, accrued penalties, and interest. IRS Publication 4235 provides additional information on contacting the IRS for lien-related inquiries.

To get a withdrawal of a federal tax lien, you must either pay the tax debt in full, satisfy the offer in a settlement agreement such as an Offer In Compromise, or the Collection Statutory Expiration Date (CSED) has passed.

Federal tax liens typically expire when the CSED date passes, which is generally 10 years from the tax assessment date. However, this period can be extended under certain circumstances, such as bankruptcy or an installment agreement.

IRS federal tax liens are public information because the Notice of Federal Tax Lien is filed with local or state authorities to alert creditors of the government’s legal claim. This information will typically appear in background checks and title searches. IRS Publication 594 provides a detailed explanation of how liens are managed.

A federal tax lien lasts until the tax debt is paid in full, a settlement agreement is satisfied, or the Collection Statutory Expiration Date (CSED) has passed. The CSED date is generally 10 years from the tax assessment date, as specified in 26 U.S. Code § 6502. 

The IRS can refile a tax lien under certain circumstances; CSED is extended due to an installment agreement or tolling events like bankruptcy. IRS Internal Revenue Manual IRM Section 5.12 provides detailed guidance.