Facing an IRS tax lien on your property can feel overwhelming. But understanding what happens when the IRS files a lien—and what to do next—can make the situation far more manageable.
In plain terms:
When the IRS puts a lien on your property, the government gets a legal claim against everything you own. It can hurt your credit, make it harder to sell or refinance, and stay in place until you pay the debt or make arrangements with the IRS. But a lien doesn’t mean you’ll lose your property overnight—and you can remove or work around it with the right steps.
This guide breaks down, in clear language, what a federal tax lien is, what it means for your property, and the options you have to fix the issue. If you want to sell land with a lien, we’ll also cover practical strategies to clear the title and close the sale.
What is a Federal Tax Lien?
A federal tax lien is the government’s legal claim against your property when you owe back taxes. Once the IRS assesses your tax debt, sends you a bill, and you don’t pay, a lien automatically attaches to everything you own—your land, home, cars, bank accounts, and future assets.
To let the public and other creditors know about this claim, the IRS files a Notice of Federal Tax Lien (NFTL). This public record alerts lenders, title companies, and anyone searching property records that the IRS has first rights to your assets.
How It Affects You
An IRS lien has serious financial effects:
- Credit Damage: It can lower your credit score, making loans harder to get.
- Selling Property: You usually can’t sell property with a lien unless you resolve it first. Buyers want a clear title.
- Refinancing: Lenders may refuse to refinance your mortgage until the lien is released or moved.
- Priority Over Other Debts: The IRS usually gets paid before other creditors.
Have a different type of lien or title problem? Check out our guide to selling property with title issues.
Lien vs. Levy: Key Difference
Many people confuse liens and levies, but they’re not the same:
- A lien is a legal claim. Think of it like a warning flag: the government is saying “you owe us money, and we have rights to your property.”
- A levy is when the IRS actually takes your property or money to collect the debt. This can include seizing bank accounts or wages.
The lien comes first. A levy happens only if you don’t resolve the situation.
How the IRS Lien Process Works
- Tax Debt Assessed: The IRS determines you owe taxes and sends a bill.
- Demand for Payment: You receive official notices asking for payment.
- Lien Automatically Attaches: If you don’t pay, a lien attaches to everything you own by law.
- Public Notice Filed: The IRS records a Notice of Federal Tax Lien (NFTL) to protect its claim against other creditors.
- Possible Levy: If you still don’t act, the IRS can eventually levy (seize) property. You’ll always get notice first.
Time Limits: The IRS generally has 10 years from the date it assesses the tax to collect it. This is called the Collection Statute Expiration Date (CSED). Some actions—like filing appeals or an Offer in Compromise—can pause this clock.
Bankruptcy: Filing bankruptcy may wipe out some tax debt, but it usually does not remove the lien. The lien typically remains attached to your property until released.
Your Options to Resolve or Remove a Federal Tax Lien
Once a lien is filed, you still have several tools to fix the issue. Which option makes sense depends on your situation:
1. Lien Discharge
Removes the lien from one specific property so you can sell that asset. The lien stays on your other property. You’ll typically file Form 14135 with the IRS to request this.
2. Certificate of Subordination
Lets another creditor (like a mortgage lender) take priority over the IRS. This doesn’t remove the lien, but it can make refinancing or selling possible. You’ll use Form 14134 to apply.
3. Withdrawal of Federal Tax Lien
Removes the public notice of the lien from credit reports and records. Your debt still exists, but this can help your credit and future transactions. You’ll use Form 12277 to request this.
4. Offer in Compromise (OIC)
You offer to settle your tax debt for less than the full amount. If the IRS accepts and you pay the agreed amount, they release the lien.
5. Appeals and Hearings
If you think the lien was filed incorrectly or the IRS denied your request unfairly, you can appeal. One option is a Collection Due Process (CDP) hearing using Form 12153.
6. Lien Release
The lien is automatically released once the debt is fully paid, or when you complete an accepted OIC. This removes the lien entirely from your property.
Selling Land With an IRS Lien
Selling land with an IRS lien is possible, but you’ll need to deal with the lien first so the buyer gets a clear title. Here are your two main paths:
Option 1: Resolve the Lien First
- Apply for discharge or subordination so the sale can go through.
- Pay the IRS from sale proceeds if needed.
- Clear the title, then sell at full market value.
This approach usually brings the highest sale price but involves paperwork, IRS approvals, and sometimes legal help.
Option 2: Sell the Property As-Is
- Sell to a cash buyer who’s willing to take on the lien issue.
- Close faster without waiting for IRS approvals.
- Accept a lower sale price in exchange for speed and simplicity.
Important: Get Professional Help
IRS liens involve tax law, real estate, and sometimes legal disputes. While this guide explains the basics, your situation may have unique factors. It’s wise to consult a tax attorney, CPA, or qualified financial advisor to understand the best strategy for you.
Bottom Line
If the IRS puts a lien on your property, don’t panic. It’s serious, but it’s also resolvable. You can remove, reduce, or work around the lien through formal IRS programs, or sell your property to a buyer who can handle it. The key is understanding your options and taking action early.
👉 Want to avoid the legal hassle? Get a cash offer for your land here.
Frequently Asked Questions
Can I sell my property if the IRS has a lien on it?
Yes, you can sell your property even with an IRS lien, but it’s more complicated. You’ll need to address the lien to provide the buyer with a clear title. This often involves paying off the debt at closing or utilizing options like a lien discharge or subordination.
How long does it take for the IRS to seize property?
The IRS does not seize property overnight; it’s a last resort within a lengthy IRS collection process. They issue multiple notices and demands, providing ample opportunity to resolve the debt. You’ll always receive at least a 30-day notice of their intent to levy before any seizure.
How much does it cost to remove a lien on property?
There isn’t a fixed “cost” solely to remove the lien. The primary expense is typically paying off your original tax debt, along with any accrued penalties and interest. You might also incur small administrative fees for certain forms, such as an Offer in Compromise (OIC) application. If you hire a tax professional, their fees will be an additional cost. Understanding the overall tax implications of selling real estate will help you budget for these costs.
Please consult your financial advisor, accountant, real estate attorney, or tax specialist. This article is for informational purposes and is not tax or legal advice.
