Sign up for your free Credit.com account    Sign Up Now
From the Experts at Credit.com

What Is a Tax Lien?

January 9, 2014 by Lucy Lazarony

What Is a Tax Lien?

The federal government takes it very seriously if you fail to pay your taxes.

Not paying Uncle Sam his due could result in a tax lien being placed on your assets.

A federal tax lien is the U.S. government's legal claim against your property when you fail to pay a tax debt.

Once you fail or neglect to pay a tax liability on time, the IRS files a public document, a notice of federal tax lien, alerting creditors that the government has a legal right to your property.

A tax lien means some pretty serious bad news for your credit. A consumer with no other negative items who has a tax lien placed on their credit report could see their credit scores plummet by 100 points or more.

A tax lien stays on your credit report for seven years from the date it is paid. And a tax lien could impact your credit for even longer if you should wait to resolve your tax liability.

Fortunately for consumers, the IRS made some changes to its policies concerning tax liens in early 2011 including:

  • Increasing the dollar threshold when liens are generally issued to $10,000.
  • Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
  • Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

Because of the changes, it is possible to have a tax lien removed once you pay a tax liability but you must submit a request to the IRS to do so. To have a tax lien withdrawn, you must file Form 12277, requesting the lien be withdrawn. If your request is accepted, the IRS will file a notice of the withdrawal and send you a copy.

You also may request in writing that the IRS notify credit reporting agencies and creditors and your financial institutions about the tax lien withdrawal.

Tax liens can have a major impact on your credit, appearing as a negative account on your credit report. To see how an unpaid tax bill may be affecting your credit, use Credit.com's free Credit Report Card, which will outline how many negative accounts your full credit report currently lists.


Sign up for your free Credit.com account. Learn More

Meet Our Experts

Lucy Lazarony Lucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.

Recommended links