What Happens if the IRS Puts a Lien on Your Property

If the IRS files a lien on your property, it can affect your credit, limit your ability to sell, and give the government a legal claim to your assets.

An IRS lien doesn’t mean you can’t sell your land. You have options to resolve the lien, work around it, or even sell your property as-is to a cash buyer who handles the tax debt.

This guide explains what happens when the IRS places a lien on your property, your legal options for removing or working around the lien, and how to successfully sell your land even with tax debt attached.

What is an IRS Lien?

An IRS lien is a legal claim the government places on your property when you owe back taxes. It’s the IRS’s way of securing their interest in your assets to ensure they get paid.

Key points about IRS liens:

• Public Record: IRS liens are filed in public records, which means they show up on title searches
• Affects Your Credit: The lien will appear on your credit report and can significantly lower your credit score
• Attaches to All Property: The lien attaches to all property you own or acquire, not just the property you owed taxes on
• Doesn’t Prevent Sale: Despite common misconceptions, an IRS lien doesn’t automatically prevent you from selling your property

How IRS Liens Affect Property Sales

When you try to sell property with an IRS lien, several things happen:

1. Title Company Discovery

When a title company runs a search, they’ll discover the IRS lien. This will be flagged as a title defect that needs to be resolved before the sale can close.

2. Buyer Concerns

Most buyers (and their lenders) won’t want to purchase property with an IRS lien attached. They don’t want to inherit your tax problems.

3. Escrow Requirements

If you do find a buyer willing to proceed, the IRS lien amount will typically need to be paid from the sale proceeds at closing. The title company will pay the IRS directly from escrow.

4. Reduced Net Proceeds

After paying off the IRS lien, you’ll receive less money from the sale than you would have without the lien.

Options for Removing an IRS Lien

You have several options for removing an IRS lien:

Option 1: Pay the Tax Debt in Full

The simplest way to remove an IRS lien is to pay the full amount you owe. Once paid, the IRS will release the lien within 30 days.

Pros:

• Completely clears the lien
• Restores your credit score over time
• Allows you to sell without complications

Cons:

• Requires having the full amount available
• May not be feasible if the debt is substantial

Option 2: Installment Agreement

You can negotiate an installment agreement with the IRS to pay your tax debt over time. The IRS may release the lien if you’re current on your payments.

Pros:

• Allows you to pay over time
• May result in lien release if payments are maintained

Cons:

• Requires ongoing monthly payments
• Doesn’t immediately resolve the lien
• Still affects your ability to sell quickly

Option 3: Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount. If accepted, the IRS will release the lien.

Pros:

• Can significantly reduce your tax debt
• Releases the lien once accepted

Cons:

• Difficult to get approved
• Long application process (6-12 months)
• Requires significant documentation

Option 4: Discharge of Property

A discharge of property removes the IRS lien from a specific property while keeping it on your other assets. This is useful if you’re trying to sell one property but don’t want to pay the full tax debt.

Pros:

• Allows you to sell the specific property
• Lien remains on other assets only

Cons:

• Complex application process
• IRS may require payment or security
• Not always approved

Option 5: Subordination

A subordination allows another lien (like a mortgage) to take priority over the IRS lien. This doesn’t remove the lien, but it can help with financing.

Pros:

• Can help with buyer financing
• Easier to obtain than discharge

Cons:

• Doesn’t remove the lien
• Still complicates the sale

Selling Property with an IRS Lien

If you can’t remove the lien or need to sell quickly, you still have options:

Traditional Sale (with Lien Payment)

You can sell your property the traditional way, but the IRS lien will need to be paid from the sale proceeds at closing.

Process:

1. List your property with a realtor or sell by owner
2. Find a buyer (who may be hesitant due to the lien)
3. At closing, the title company pays the IRS lien from escrow
4. You receive the remaining proceeds

Challenges:

• Many buyers will avoid properties with IRS liens
• Lenders may refuse to finance the purchase
• Sale process can be slow
• Reduced net proceeds after paying the lien

Cash Sale to a Land Buyer

Selling to a cash land buyer (like Sell Now Land Buyers) can be a faster option, even with an IRS lien.

How it works:

1. We make you a cash offer for your land
2. You accept the offer
3. At closing, we pay the IRS lien from the sale proceeds
4. You receive the remaining cash

Benefits:

• Fast closing (often 2-4 weeks)
• No need to find a buyer yourself
• We handle the lien payment at closing
• No financing contingencies
• Can close even with the lien attached

Real-World Example: Selling Land with an IRS Lien

A landowner in Texas came to us with a 10-acre property that had an $18,000 IRS lien attached. They’d tried to sell it for months with no success because buyers were concerned about the lien.

The Challenge:

• Property worth approximately $45,000
• $18,000 IRS lien attached
• Traditional buyers wouldn’t consider it
• Owner needed to sell quickly

Our Solution: We made a cash offer of $42,000 for the property. At closing:

• We paid the $18,000 IRS lien from the sale proceeds
• The owner received $24,000 in cash
• The sale closed in 3 weeks
• The IRS lien was fully satisfied

The Result: The landowner was able to sell their property quickly, resolve their IRS lien, and move on without the ongoing tax burden.

Key Takeaways

An IRS lien doesn’t have to prevent you from selling your land. Here are the key points:

• IRS liens are common and don’t automatically block sales
• You have multiple options for removing or working around liens
• Cash buyers can often purchase properties with IRS liens
• The lien gets paid at closing from the sale proceeds
• You can sell quickly even with a lien attached

If you’re dealing with an IRS lien and need to sell your land, we can help. We’ve handled many transactions involving IRS liens and can guide you through the process.

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This article is for informational purposes and is not tax or legal advice. Consult with a tax professional or attorney for advice specific to your situation.