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What Is a Tax Lien? And Why Does the IRS Use It?

When you owe back taxes and fail to pay or make arrangements, the IRS can file a public document known as a Notice of Federal Tax Lien. This signals that the IRS has a legal right to your current and future property—real estate, personal property, and financial assets. In 2025, as part of a push for greater enforcement and accountability, the IRS continues to aggressively file liens against taxpayers with unresolved debts.

Unlike a levy, which seizes property, a lien is a claim. It does not immediately take your property but instead establishes the IRS’s right to it, should you sell or refinance it.

Why IRS Tax Liens Are a Big Deal

Here’s what you need to know about how tax liens can seriously disrupt your financial life:

  • Credit Damage: Although tax liens no longer appear on standard credit reports, many lenders still conduct public record searches. A lien can make borrowing money or obtaining a mortgage extremely difficult.

  • Business Interference: If you run a business, a lien can attach to all your business property, including accounts receivable. This can devastate operations and cut off critical cash flow.

  • Property Complications: Want to sell your house or refinance? A tax lien may make it impossible until the issue is resolved or negotiated.

  • Public Record: Liens are public, which means employers, landlords, and business partners could discover them with ease.

How Do Tax Liens Work?

The IRS generally follows this path:

  1. It assesses your liability.

  2. It sends you a bill.

  3. You fail to pay.

  4. The IRS then files a Notice of Federal Tax Lien with your county recorder’s office or the secretary of state.

At this point, your name and tax debt are part of the public record.

Options for Removing or Minimizing the Impact of a Tax Lien

Thankfully, IRS tax liens are not permanent. Several avenues can help you remove them or reduce their impact. Here are the most effective:

1. Full Payment and Release of Lien

Once your full tax debt is paid—including penalties and interest—the IRS will issue a Certificate of Release of Federal Tax Lien within 30 days. This completely removes the lien and restores your financial standing.

2. Lien Withdrawal (Even Without Full Payment)

In some cases, you may qualify for a withdrawal—which removes the lien from public record entirely. This is different from a “release.” The IRS may approve a withdrawal if:

  • You’re in a Direct Debit Installment Agreement and owe less than $25,000.

  • Withdrawing the lien would make it easier for the IRS to collect the debt.

  • You can prove the lien was filed in error.

3. Subordination

Subordination doesn’t remove the lien, but it allows other creditors to move ahead of the IRS in line. This can be useful if you’re trying to refinance your home or secure a business loan and need to show creditors you’re a viable borrower.

4. Discharge of Property

If you’re trying to sell a particular asset (like a house), the IRS may allow you to discharge that specific property from the lien. This is especially helpful during real estate transactions.

How to Prevent a Tax Lien in the First Place

The best way to avoid a tax lien is to address IRS notices early. Here’s what you can do:

  • File your returns on time (even if you can’t pay).

  • Set up a payment plan immediately if you receive a bill.

  • Communicate with the IRS or a tax resolution expert before the IRS escalates your case.

Why Work With Accelerated Tax Resolution?

IRS liens are stressful and complex. At Accelerated Tax Resolution, we take a comprehensive, strategic approach:

  • We assess your entire financial picture.

  • We determine whether you qualify for a lien withdrawal, subordination, or settlement.

  • We handle all IRS communication to keep the process moving efficiently.

  • We help rebuild your financial reputation and creditworthiness.

Led by a team with over 33 years of experience in tax assistance, Accelerated Tax Resolution has helped more than 12,000 taxpayers navigate IRS collections with confidence. If a tax lien is threatening your assets or future, don’t wait until the situation escalates. Let our seasoned professionals work on your behalf to resolve it.