Tax Lien
The government's legal claim against a taxpayer's property when they fail to pay a tax debt.
What is Tax Lien?
A tax lien is a legal claim the federal, state, or local government places against a taxpayer's property—including real estate, financial accounts, and personal property—when taxes remain unpaid after notice and demand. The IRS files a Notice of Federal Tax Lien (NFTL) to alert creditors that the government has a priority claim. A tax lien can damage credit scores, complicate property sales or refinancing, and impair the ability to get business or personal loans. Liens can be released by paying the debt in full, entering an installment agreement, or having the IRS accept an offer in compromise.
Example
A small business owner owes $45,000 in unpaid payroll taxes. After ignoring IRS notices, the IRS files a Notice of Federal Tax Lien in the county recorder's office. The lien appears on credit reports, prevents the owner from refinancing their building, and takes priority over most other creditors if the property is sold—until the tax debt is fully paid or otherwise resolved.