Quick overview
A federal tax lien establishes the government’s legal claim against your property (real estate, personal property, and some financial assets) when you have unpaid federal tax debt. The IRS may file a Notice of Federal Tax Lien (NFTL) to publicly record that claim. State and local tax authorities can file similar liens for unpaid state taxes.
In my practice helping taxpayers, I’ve seen well-meaning people assume a lien only matters if it appears on a credit report. That’s no longer a reliable rule — while tax liens are largely removed from consumer credit files maintained by the major credit bureaus, liens still affect title searches, lender decisions, and the ability to sell or refinance property. (See authoritative guidance from the IRS and Consumer Financial Protection Bureau.)
This article walks through how liens are created and recorded, the difference between release, withdrawal, subordination and discharge, how liens currently interact with credit reporting, and practical steps to remove or minimize the damage.
How a tax lien is created (step-by-step)
- Tax assessment: The IRS or state tax agency calculates and posts a tax assessment against your tax account.
- Notice and demand: The agency sends a notice and demand for payment and typically one or more reminders.
- Failure to pay: If the tax remains unpaid, the law gives the government a statutory lien against your property. The lien arises by operation of law when the tax is assessed and unpaid.
- Filing the NFTL: To make the claim a matter of public record and to establish priority against other creditors, the government may file a Notice of Federal Tax Lien with the appropriate county or state records office.
- Notification: The taxpayer receives notice that the lien has been filed and usually has a limited window (often 30 days) to request a Collection Due Process (CDP) hearing to contest the filing or collection action.
Authoritative source: IRS Publication 594 explains the collection process and NFTLs (see IRS guidance). The Consumer Financial Protection Bureau also summarizes how public-record liens can affect credit and lending decisions.
Filing vs. automatic lien: what’s the difference?
- Automatic lien: By statute the lien exists when a tax assessment is made and payment is not received. That statutory lien exists whether or not the IRS files an NFTL.
- Filed NFTL: The NFTL is a public notice. Filing does not create the lien (the underlying lien already exists); filing establishes priority and alerts third parties.
Why it matters: Some lenders and title companies won’t approve mortgages or closings if an NFTL is recorded. A lien that is only on the IRS internal records but not filed may cause fewer problems than a recorded NFTL, so the IRS sometimes uses withdrawal or subordination tools to resolve that friction.
Release, withdrawal, subordination, and discharge — what each means
- Release: A Certificate of Release is issued when the tax liability is satisfied (typically after full payment or when enforced collection is complete). A release removes the government’s claim against property.
- Withdrawal: A withdrawal removes the public Notice of Federal Tax Lien so it no longer appears in public records. Withdrawal does not erase the underlying tax debt — it only removes the recorded notice. The IRS can withdraw a lien under certain criteria (e.g., filing was in error or withdrawal facilitates collection). In practice, withdrawals are used to help taxpayers get credit or complete a sale.
- Subordination: Subordination changes priority so another creditor (often a mortgage lender) can take priority over the federal tax lien for a particular loan or transaction. It does not remove the lien.
- Discharge (of property): A discharge clears a specific property from lien application for purposes of a sale or refinancing while the lien remains attached to other assets.
For practical guidance on getting a lien released after payment, see FinHelp’s guide: How to Get a Tax Lien Released After Full Payment (internal link).
Related pages: Resolving Tax Liens: Removal, Withdrawal, and Subordination; How Tax Liens Affect Your Credit and Property Sales.
Do tax liens still appear on credit reports? How they affect credit scores
Short answer: Most consumer credit reports no longer include tax liens, but liens still matter to lenders and for public records searches.
- Credit reporting: Since 2017 major consumer credit bureaus (Equifax, Experian, TransUnion) removed most tax liens and civil judgments from consumer credit reports. That change means a recorded NFTL typically will not appear on your credit report or directly move your FICO score the way a late payment or bankruptcy would. (Consumer Financial Protection Bureau coverage.)
- Impact on lending and title: Even if a lien is not on a credit report, lenders, title companies, and real estate buyers check public records. A recorded NFTL can block a home sale or refinance until the lien is addressed. Many mortgage underwriters require liens to be released or subordinated before approving a loan.
- Indirect effects: A lien can trigger other collection steps — bank levies, wage garnishments, or offsets — that do appear as delinquencies or collections on credit reports and will harm credit.
In short: tax liens are less likely to show as a direct item on your credit file, but they still meaningfully affect your access to credit and home sales.
Sources: Consumer Financial Protection Bureau; IRS collection guidance.
Practical steps to resolve a tax lien
- Confirm the balance and origin: Contact the IRS or state agency and request a tax-account transcript to verify the assessment, taxes, penalties, and interest.
- Pay in full: Paying the liability in full is the fastest way to get a release of the lien. After payment, request a Certificate of Release and confirm the county recorder removes the public filing.
- Set up an installment agreement: If you can’t pay in full, an installment agreement prevents enforced collection and can lead to release after compliance in some cases. Some installment plans still require the lien to remain until paid.
- Offer in Compromise (OIC): If you qualify, an OIC can settle the debt for less than full amount. If accepted, the IRS issues appropriate lien releases or statements per settlement terms.
- Request withdrawal: When filing of an NFTL caused economic hardship or was in error, apply for a withdrawal. The IRS has written criteria and requires full compliance with payment or agreement terms.
- Seek subordination or discharge for specific property: If you are selling or refinancing a property, request a subordination or discharge so the transaction can proceed while the lien remains attached to other assets.
- Consider bankruptcy options carefully: Bankruptcy can affect tax debts differently depending on type and age of the tax. Tax liens typically survive bankruptcy but the lien might attach only to the debtor’s property under specific rules.
Checklist when dealing with the IRS:
- Get everything in writing (confirm dates, amounts, and contact names).
- Save proof of payments and recorded releases.
- If you make payments, ask for a release timeline in writing.
- Follow up with the county recorder to ensure public records are corrected.
Internal resource: For detailed withdrawal, subordination and removal options, see FinHelp’s Resolving Tax Liens: Removal, Withdrawal, and Subordination.
Common mistakes and how to avoid them
- Mistake: Assuming tax liens are irrelevant because they don’t appear on credit reports. Reality: They still block property transactions and affect lenders’ due diligence.
- Mistake: Waiting to verify the lien details. Always obtain tax transcripts and the NFTL filing copy; errors do happen.
- Mistake: Ignoring notification letters. Many enforcement steps start with mailed notices — ignoring them removes opportunities for hearings or affordable resolution options.
In my practice I often advise clients to act within the 30-day CDP window when an NFTL is filed. Missing that window can limit your administrative appeal options and make judicial review more complex.
Timeline examples (typical but not universal)
- Day 0: Tax assessment posted and taxpayer receives a Notice and Demand for Payment.
- 30–60 days: If unpaid, additional notices or final notices may be sent.
- After final notice: IRS files NFTL (timing varies by case and agency backlog); taxpayer gets notification and a period to request a hearing.
- After payment: IRS issues a Certificate of Release and should notify the county recorder to clear the public record; processing time varies by jurisdiction.
Frequently asked questions
Q: How long does a federal tax lien last?
A: A federal tax lien generally lasts 10 years from the date of assessment, unless extended by agreement, collection activity, or specific events that suspend the period. The lien may also be released earlier when the tax is fully satisfied.
Q: Can I remove a lien from my public record without paying?
A: In limited situations the IRS may withdraw a filed NFTL (removing it from public record) even if the tax debt remains, if withdrawal will facilitate collection or if the filing was improper. Subordination or discharge of a property may also be possible without full payment.
Q: Does paying a lien immediately restore my ability to get a mortgage?
A: Paying in full and obtaining a release is the clearest path; lenders often require a release or subordination before closing. Allow time for the release to be recorded and reflected in title searches.
Action plan: what to do now
- Obtain your tax transcript and a copy of any filed NFTL. 2. Call the appropriate IRS or state office for payment options. 3. If you plan to sell or refinance, notify your lender and request subordination or discharge as needed. 4. Consider hiring a CPA, tax attorney, or an enrolled agent experienced with federal tax lien matters. 5. Keep meticulous records of all communications and filings.
In my experience, proactive communication with the IRS combined with documented payment plans or offers often produces faster release or workable subordination than waiting for enforced collection.
Professional disclaimer
This article is educational and not a substitute for personalized tax advice. Tax rules and procedures change; consult a licensed CPA, enrolled agent, or tax attorney about specific cases. For the IRS’s official rules on liens and collections, see IRS Publication 594 and related IRS pages.
Authoritative references
- IRS Publication 594: Understanding the Collection Process (IRS.gov)
- Consumer Financial Protection Bureau: Tax Liens and Your Credit (consumerfinance.gov)
Internal links
- How to Get a Tax Lien Released After Full Payment: https://finhelp.io/glossary/how-to-get-a-tax-lien-released-after-full-payment/
- Resolving Tax Liens: Removal, Withdrawal, and Subordination: https://finhelp.io/glossary/resolving-tax-liens-removal-withdrawal-and-subordination/
- How Tax Liens Affect Your Credit and Property Sales: https://finhelp.io/glossary/how-tax-liens-affect-your-credit-and-property-sales/
If you want, I can help draft a letter to the IRS or a checklist for a specific lien situation (include dates and documents available) — but that would require a paid consultation or referral to a licensed practitioner, not covered by this article.
