Background

A tax lien (federal or state) is the government’s legal claim on your current and future property—real estate, bank accounts, and some personal or business assets—when taxes go unpaid. The IRS can file a Notice of Federal Tax Lien (NFTL) after it issues a demand for payment and the taxpayer neglects or refuses to pay (IRS guidance). The lien protects the government’s interest and typically appears in county or state public records.

Key facts to know (current as of 2025)

  • A lien is a public record and can be discovered by lenders, title companies, and anyone who searches public filings. It can block or complicate home sales and refinances. (See consequences for homeownership.)
  • Major credit bureaus removed tax liens and civil judgments from consumer credit reports in 2017–2018, so a lien may not appear on your credit report but will still affect lenders and title searches (Consumer Financial Protection Bureau).
  • The IRS generally has 10 years from the date of assessment to collect the tax (statute of limitations for collection), after which the lien and collection authority usually expire unless extended.

How tax liens affect your credit and lending

  • Credit reports: Although liens are largely absent from consumer credit files today, lenders regularly run title checks and public-record searches; a filed lien can reduce loan approvals or force higher interest rates. For details on how liens show up to lenders, see how tax liens appear on credit reports and what to do.
  • Mortgage and refinance hurdles: Title companies typically require liens to be cleared or subordinated before closing. That can delay or cancel sales and refinances; in some cases, taxes are paid from sale proceeds.
  • Business borrowing: A lien against you or your business can limit borrowing, reduce available credit, or trigger loan covenants.

How a lien can become a levy

A lien is different from a levy. A lien is a claim; a levy is seizure. If you ignore notices and collection efforts, the IRS or state authority can levy bank accounts, wages, or assets to satisfy the debt. Collection actions follow statutory notice procedures (IRS).

Common outcomes and timelines

  • Release: When you pay the debt in full, the IRS must issue a Certificate of Release of Federal Tax Lien (usually within 30 days).
  • Withdrawal: In limited cases the IRS may withdraw a Notice of Federal Tax Lien (removes public notice and can help with credit/financing) if withdrawal would be in the best interest of both taxpayer and government (see IRS guidance on lien withdrawal).
  • Subordination: Allows other creditors (like mortgage lenders) to move ahead of the government’s lien for a specific transaction to allow a sale or refinance.

Practical strategies to limit damage

  1. Verify the lien. Request proof that the lien is valid and that the IRS followed required notices. Mistakes happen.
  2. Communicate early. Contact the IRS or state tax office to explore options: installment agreement, Offer in Compromise, or request a lien withdrawal/subordination if you meet criteria.
  3. Prioritize liquidity for a sale. If you plan to sell property, plan to use sale proceeds to clear the lien or negotiate payoff details with the title company and buyer.
  4. Use professional help. Tax attorneys, enrolled agents, or experienced CPAs can negotiate releases, payment plans, or appeals more efficiently than DIY attempts.

Real-world example (typical)

A homeowner discovered a historical state tax lien during a title search when trying to refinance. Even though the lien didn’t show on her credit report, the lender required the lien to be released or paid from escrow before closing. She negotiated an installment agreement with the state, obtained a subordination letter that let the refinance proceed, and then paid down the lien over time.

Common mistakes and misconceptions

  • “Tax liens always appear on credit reports.” Not true since credit bureaus removed most public-record tax liens in 2017–2018. Lenders still find liens via public documents.
  • “Once filed, a lien never goes away.” False. Liens can be released when paid, withdrawn in narrow cases, subordinated, or they can expire when the IRS’s collection statute runs out.
  • “You must let a lien turn into a levy.” No. Proactive negotiation and payment plans usually avoid levies.

Action checklist

  • Check public records and your account transcript with the IRS to confirm any lien.
  • Contact the tax authority to learn your options: payment plan, Offer in Compromise, discharge, subordination, or withdrawal.
  • Get a written lien release or withdrawal if debt is satisfied.
  • Work with a tax professional for negotiation and documentation.

Internal resources

Frequently asked questions (brief)

  • How long does a federal tax lien last? The IRS generally has 10 years from assessment to collect; a lien may be released sooner if paid. (IRS)
  • Can I sell my home with a tax lien? Yes, but the lien typically must be paid or handled at closing; subordination or release may be required.
  • Will a lien lower my credit score? Not usually via credit-report scoring today, but lenders who find a lien can deny credit or charge higher interest.

Professional disclaimer

This article is educational and does not constitute personalized tax, legal, or financial advice. For help with a specific lien or collection matter, consult a qualified tax professional, enrolled agent, or attorney.

Sources

  • Internal Revenue Service (Notice of Federal Tax Lien guidance and collection procedures)
  • Consumer Financial Protection Bureau (on public record items and credit reporting)

(Information current through 2025.)