Federal and State Tax Liens
If you owe money to the government (Federal and state) because of certain delinquent debts, the IRS and State tax agencies can file LIENS that will encumber your real and personal property.
Taxpayers are often surprised that they are unable to sell a house when the title company finds a tax lien recorded. The lien must be released, subordinated or discharged before the sale can go through.
Below is a link to the IRS website with videos that discuss the process to resolve a lien on real property to facilitate a sale.
The following information on the Federal tax lien is from the IRS website, and is reprinted for your convenience.
Notice of Federal
Liens give us a
legal claim to your property as security or payment for your tax
debt. A Notice of Federal Tax Lien may be filed only after:
We send you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and You neglect or refuse to fully pay the debt within 10 days after we notify you about it.
requirements are met, a lien is created for the amount of your
tax debt. By filing notice of this lien, your creditors are
publicly notified that we have a claim against all your
property, including property you acquire after the lien is
filed. This notice is used by courts to establish priority in
certain situations, such as bankruptcy proceedings or sales of
Once a lien is
filed, your credit rating may be harmed. You may not be able to
get a loan to buy a house or a car, get a new credit card, or
sign a lease. Therefore it is important that you work to resolve
your tax liability as quickly as possible, before lien filing
In addition, you
must pay all fees that a state or other jurisdiction charges to
file and release the lien. These fees will be added to the
amount you owe. Refer to Publication 1450, Request for Release
of Federal Tax Lien (PDF).
The full amount of
your lien will remain a matter of public record until it is paid
in full, including all accruals and additions. However, at any
time you may request an updated lien payoff amount to show the
remaining balance due by calling the toll-free customer service
telephone number at 1-800-913-6050. An IRS employee will issue
you a letter with the current amount that must be paid before we
release the Notice of Federal Tax Lien.
If you are giving up
ownership of property, such as when you sell your home, you may
apply for a Certificate of Discharge. Each application for a
discharge of a tax lien releases the effects of the lien against
one piece of property. Note that when certain conditions exist,
a third party may also request a Certificate of Discharge. If
you're selling your primary residence, you may apply for a
taxpayer relocation expense allowance. Certain conditions and
limitations apply. Refer to Publication 783, Instructions on How
to Apply for a Certificate of Discharge of Property from the
Federal Tax Lien (PDF).
In some cases, a
federal tax lien can be made secondary (subordinate) to another lien. That
process is called subordination. Refer to Publication 784, How
to Prepare Application for Certificate of Subordination of
Federal Tax Lien. (PDF)
By law, a filed notice of tax lien can be withdrawn if:
We will give you a
copy of the withdrawal, and if you write to us, we will send a
copy to other institutions you name.
If you have
questions regarding basic lien inquiries such as routine lien
releases and lien payoff amounts, contact the Centralized Lien
Unit by calling the toll free telephone number (1-800-913-6050).
The law requires us to notify you in writing not more than 5 business days after the filing of a lien. We may give you this notice in person, leave it at your home or your usual place of business, or send it by certified or registered mail to your last known address. You may ask an IRS manager to review your case, and you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice. You must file your request by the date shown on your notice. Some of the issues you may discuss include: