Immediate steps you should take

If the IRS files a Notice of Federal Tax Lien (NFTL) against you, act deliberately and quickly. In my practice advising taxpayers for over 15 years, the clients who responded promptly avoided the most damaging consequences. The first 7–30 days after the NFTL is filed are critical because that’s when you can begin negotiating options to minimize disruption to a pending real estate transaction, business loan, or other financial plans.

  1. Confirm the lien is legitimate and matches your records
  • Compare the NFTL notice to IRS correspondence and your tax records. The lien notice should include the tax periods, balance due, and a contact number. Scammers sometimes mimic IRS notices; verify using the IRS website or by calling the number on IRS.gov, not a number given in the notice. See the IRS guidance on understanding a Notice of Federal Tax Lien for verification steps (IRS).
  1. Don’t ignore mail or calls from the IRS
  • Ignoring an NFTL won’t make it go away. It can complicate home sales, refinancing, and business borrowing. I’ve seen clients delay for months and then face added penalties, interest, and even levies on bank accounts.
  1. Gather documentation and create a simple timeline
  • Collect recent tax returns, IRS notices (CP504, CP504A or other collection notices), bank statements, and any proof of payments or correspondence. Make a one-page timeline of when you received notices and when you responded. This helps both you and any tax professional assess immediate options.

Understand how a lien affects you

A federal tax lien is public record and attaches to all your assets and rights to property: real estate, vehicles, bank accounts, and certain future assets. While the three major credit bureaus largely removed tax liens from consumer credit reports in 2017–2018, lenders and title companies still search public records and will find an NFTL. That can block sales, refinances, or loans despite the lien not appearing on a credit report (Consumer Financial Protection Bureau; IRS).

Key practical effects:

  • You may not be able to sell or refinance property without resolving the lien.
  • Lenders may decline mortgage or business financing until you clear, subordinate, or obtain a discharge for the property involved.
  • The IRS still has priority over other creditors for the unpaid taxes, subject to specific exceptions.

Paths to resolve or limit the lien’s impact

Choose the option that fits your finances, timeline, and risk tolerance. Common solutions include full payment, installment agreements, Offer in Compromise, lien withdrawal, subordination, and discharge of property.

  1. Pay in full
  • Paying the balance in full is the fastest way to secure a release. After full payment, the IRS typically issues a Certificate of Release of Federal Tax Lien. In practice it can still take a few weeks for the public record to reflect the release, so keep proof of payment and the IRS release letter.
  1. Installment agreement
  • You can enter a monthly payment plan with the IRS. An installment agreement does not automatically remove the lien; the NFTL generally remains in place until full payment unless you qualify for specific relief under IRS Fresh Start provisions.
  1. Offer in Compromise (OIC)
  • An OIC lets eligible taxpayers settle the tax debt for less than the full amount if paying the full amount would create economic hardship. OIC approval can lead to lien release or subordinate terms depending on the agreement.
  1. Request a withdrawal under Fresh Start rules
  • If you meet the IRS criteria, you can request a withdrawal of the NFTL so it won’t appear on public records anymore. Withdrawal is limited to specific circumstances (for example, entering into a direct debit installment agreement or full payment through certain channels). See the IRS guidance on lien withdrawals for criteria and procedures (IRS).
  1. Subordination or discharge for property sales
  • Subordination lets other creditors move ahead of the IRS for a specific loan (commonly used to refinance). A discharge removes the lien from a particular property so you can sell it free of the federal lien—useful when a buyer would not close with a lien attached. Both options require IRS forms and conditions to be met.
  1. Challenge the lien (if improper)
  • If the IRS filed the NFTL in error—wrong taxpayer, incorrect amount, or the tax is already resolved—you can file a lien reconsideration request. Keep documentation that errors exist and request a collection due process hearing if eligible.

For step-by-step options on how to release an IRS tax lien and requirements, see our detailed guide: How to Release an IRS Tax Lien: Steps and Requirements.

How to interact with the IRS and what to request

  • Contact the IRS collections office listed on the notice or call the general number at IRS.gov to confirm details. Always document phone calls: date, time, agent name/ID, and what was agreed.
  • If you agree to an installment plan, request the agreement in writing and confirm whether the NFTL will be withdrawn or remains filed.
  • If you believe a withdrawal or discharge is appropriate, request the specific form and instructions from the IRS collections officer and follow up in writing.

Protecting immediate financial transactions

  • If you are in the middle of a real estate closing or loan application, inform your title company and lender immediately. In many cases you can negotiate a short window to clear or subordinate the lien. Use our article on options when the IRS files a Notice of Federal Tax Lien for strategies I commonly advise in time-sensitive transactions.

What about bankruptcy and levies?

  • A federal tax lien is not automatically removed in bankruptcy; liens may remain but bankruptcy can halt collections temporarily. Levies (seizure of assets or bank funds) are a separate collection tool—the IRS can levy even when a lien is in place. Discuss immediate levy risk with a tax attorney or enrolled agent.

Practical checklist and sample timeline (first 30 days)

  • Day 1–3: Verify notice authenticity; don’t rely on caller-provided numbers.
  • Day 3–7: Gather tax returns, payment records, and notices.
  • Day 7–14: Contact the IRS to verify amounts and discuss options.
  • Day 10–30: If possible, negotiate an installment agreement, OIC, or request withdrawal. If escrow/closing is scheduled, request a discharge or subordination for that property.

Mistakes to avoid

  • Don’t ignore mail or calls from the IRS.
  • Don’t assume paying off the tax balance is unnecessary because the lien won’t affect your credit report; public-record searches will still show the lien.
  • Don’t sign anything without understanding whether the lien remains or is withdrawn/released.

Costs and timelines to expect

  • Time to resolve an NFTL depends on the chosen path: full payment and release can take weeks; installment plans keep the lien in place but manage collections; OICs can take months to process. A lien withdrawal, if approved, can be processed in a few weeks but requires qualifying conditions.

When to get professional help

Work with a qualified tax attorney, certified public accountant, or enrolled agent when:

  • You face a levy or imminent property sale;
  • You are considering bankruptcy;
  • The IRS filed the lien in error; or
  • You need representation in appeals or collection due process hearings.

In my practice, a timely request for lien withdrawal or a targeted subordination for refinancing has saved clients thousands of dollars in loan costs and prevented lost home sales.

How lien records interact with lenders and title companies

Even though credit bureaus largely excluded tax liens from consumer credit reports, title searches and public-record checks used by lenders and title companies will still discover an NFTL. That is why you may need a discharge, subordination, or proof of payment before a lender will close.

For guidance on how tax liens affect credit and removal strategies, see our in-depth article: How Tax Liens Affect Credit and Ways to Remove Them.

Sample language to use when you contact the IRS (email or letter)

  • Briefly state: your full name, SSN or EIN, notice number, tax periods affected, and a clear request (for example, “I request verification of the Notice of Federal Tax Lien filed on [date] and documentation supporting the amount claimed.”). Include copies of supporting documents, not originals.

Final notes and resources

A Notice of Federal Tax Lien is serious, but it is manageable if you respond quickly and methodically. Use authoritative IRS resources for forms and official procedures (for example, IRS guidance on understanding a Notice of Federal Tax Lien and the Fresh Start lien withdrawal rules). If you need more practical steps for a narrow situation—selling a home, refinancing, or disputing a lien—see these related guides on FinHelp:

Authoritative sources: IRS — Understanding a Notice of Federal Tax Lien: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-notice-of-federal-tax-lien; IRS — Lien Withdrawal: https://www.irs.gov/collections/how-collections-works-liens-withdrawals; Consumer Financial Protection Bureau — public-records and credit reporting guidance.

Professional disclaimer: This article is educational and not individualized legal or tax advice. Tax situations are unique—consult a licensed tax professional, enrolled agent, or tax attorney before making decisions that affect your legal or financial rights.