Overview

When the IRS or a state tax agency files a tax lien, the filing signals a secured legal claim against a taxpayer’s property to protect the government’s interest in unpaid tax debt. A lien is not the same as a levy: a lien is a public claim on property, while a levy is the legal seizure of assets to satisfy tax debt. Understanding the immediate consequences and the long-term remedies can help you limit damage and restore financial footing.

(Author’s note: In my work helping clients with tax resolution, prompt, informed action after a lien is filed often determines whether a taxpayer can keep access to credit, sell property, or avoid more aggressive collection tools.)

Sources: IRS guidance on notices and liens (IRS.gov), and consumer resources from the Consumer Financial Protection Bureau (CFPB).

Immediate effects of a tax lien

  • Public record and clouded title: The IRS files a Notice of Federal Tax Lien (NFTL) in county or state records. That public filing puts a cloud on the title to real estate and other listed assets, creating problems for property transfers, refinancing, and closing on sales (IRS: Notice of Federal Tax Lien).

  • Impact on lending and underwriting: Although the IRS stopped routinely providing lien data to the three major credit bureaus in 2018, the lien remains public record and will show up in title searches and manual underwriting. Mortgage lenders, title companies and some business partners will treat an active lien as a material obstacle to closing or approving credit.

  • Priority of claims: A federal tax lien attaches to all your current and future property and may take priority over other creditors depending on the timing of filings and local law. A subordination or discharge may be required to free specific assets for sale or refinance.

  • Business disruption: For small businesses and self-employed taxpayers, a lien can restrict access to lines of credit, hamper vendor relationships, and make it harder to qualify for business loans.

  • Collections risk: A lien is one step in the collection process. If taxes remain unpaid, the IRS or state may pursue levies (bank account seizures, wage garnishments) or other collection remedies.

What to do immediately after a lien is filed

  1. Read all IRS or state notices carefully and confirm the lien’s details (amount, tax years, date of filing). Mistakes happen; you have rights to appeal.

  2. Verify balances and identity: Check your account transcript on IRS.gov and compare with the NFTL filing. If the lien is based on identity theft or a misapplied payment, raise the issue immediately.

  3. Don’t ignore the notice: Ignoring a lien rarely makes it go away and makes later relief harder. Early engagement with the IRS or state revenue department gives you more options.

  4. Consider short-term fixes: If you can pay in full, a release of the lien follows payment. If not, an installment agreement, partial-payment plan, or Offer in Compromise might prevent escalation.

  5. Document everything: Keep copies of all communications, payments, and correspondence. If you later need withdrawal or subordination, paperwork will speed the process.

Authoritative resources: IRS pages on NFTL and payment plans. See IRS: Notice of Federal Tax Lien and IRS: Payment Plans & Installment Agreements.

Short-term resolutions that limit immediate harm

  • Pay the tax in full. Once taxes are paid, the IRS issues a Certificate of Release for the federal lien. The IRS generally files the release within 30 days after full payment (IRS: Release of a Federal Tax Lien).

  • Request an installment agreement. For many taxpayers, an installment plan prevents additional collection actions, and the lien remains but can be continuously managed under the agreement (IRS: Installment Agreements).

  • Apply for Currently Not Collectible (CNC) status. If you can demonstrate inability to pay living expenses, the IRS may temporarily pause collection; the lien stays in place but levies may be put on hold.

  • Offer in Compromise (OIC). If paying the full amount creates financial hardship, an OIC lets qualifying taxpayers settle for less than the full liability. Note: OIC applications require careful documentation and are not accepted automatically (IRS: Offer in Compromise).

Long-term solutions and formal remedies

  • Release of lien after payment: After you pay the assessed tax, the IRS will issue a Certificate of Release of Federal Tax Lien and file it with the local recording office to clear the public record for that liability.

  • Withdrawal of a filed NFTL: Under limited circumstances the IRS will withdraw a filed Notice of Federal Tax Lien. Withdrawal removes the public notice and is available when withdrawal will facilitate collection (for example, when an installment agreement is in place and withdrawal will allow a taxpayer to refinance). See the IRS guidance on withdrawal procedures and the application process (IRS: Withdrawal of a Federal Tax Lien).

  • Subordination: The IRS can subordinate its lien to allow a new creditor to take a higher priority position (useful for mortgage refinances). Subordination does not remove the lien; it simply changes the lien priority for a specific creditor.

  • Discharge of property: The IRS can discharge a specific parcel of property from the lien so that it can be sold; the lien remains against other assets. This is usually handled through a formal request and documentation.

  • Bankruptcy considerations: Bankruptcy may affect how liens are treated. A lien is a secured claim that generally survives bankruptcy, but bankruptcy can change priorities and allow discharge of the underlying tax liability in certain circumstances. Consult a bankruptcy attorney for case-specific guidance.

  • Expiration of collection authority (CSED): The IRS generally has 10 years from the date of assessment to collect taxes (Collection Statute Expiration Date). After that period the agency typically cannot pursue collection, but taxpayers should confirm dates on their account transcripts and consult a professional (IRS: Collection Statute Expiration Date).

Credit reporting and timeline realities

  • Credit bureau reporting: The IRS stopped routinely providing tax lien data to the major credit bureaus in 2018. Although that removed the most visible channel by which liens affected FICO-style reports, the underlying public record still exists. Title searches, manual credit checks, and lender due diligence will still uncover a lien.

  • Public record lifespan: A released lien is filed in public records to show it was satisfied. Some records may remain searchable for years and influence third-party decisions even after release. For borrowers, a withdrawal or discharge is often the cleanest outcome for future closings.

  • Typical timeframes: Releases after full payment are generally filed within 30 days. Withdrawals, subordinations, and discharges require additional review and paperwork and can take weeks to months depending on complexity and response time from the IRS or state agency.

Common mistakes and how to avoid them

  • Mistake: Ignoring notices. Fix: Engage early, confirm balances, and document everything.

  • Mistake: Assuming payment will automatically restore credit. Fix: Understand that title and underwriting issues can persist; ask for formal release or withdrawal and get copies filed with the recorder’s office.

  • Mistake: Accepting poor third-party help. Fix: Use accredited tax professionals (CPAs, enrolled agents, tax attorneys) and verify credentials.

Practical examples (anonymized)

  • In practice, I helped a small business owner who could not qualify for a refinance because a lien appeared on his title. We negotiated a short-term installment agreement and applied for a targeted discharge for the property being refinanced; that allowed the sale to close while the lien remained secured against other business assets.

  • Another client was told a lien would automatically drop from credit reports after payment. The IRS release cleared the legal claim but the borrower still had to produce the release to the lender and title company; we obtained certified copies and the refinance completed in 45 days.

Where to get help

Final advice and disclaimer

If a lien has been filed against you, take immediate, documented action: confirm the amount, explore payment or installment arrangements, and consult a qualified tax resolution professional. Each case is facts‑specific; this article is educational and not a substitute for personalized legal or tax advice. For case-specific guidance, consult a tax attorney, CPA, or enrolled agent.

Authoritative sources: IRS.gov (Notice of Federal Tax Lien; Release and Withdrawal guidance; Offer in Compromise), Consumer Financial Protection Bureau. All facts verified against IRS guidance current as of 2025.