Tax Liens

Tax Lien: Everything You Need to Know About This Financial Weapon

If you’re like most people, the words “tax lien” probably sound pretty scary. But what exactly is a tax lien, and more importantly, what can it do to you? In this post, we will discuss everything you need to know about tax liens. What they are, how they work, and how to stop them from happening to you. We’ll also cover some of the myths about tax liens that often scare people unnecessarily. So if you’re curious about this powerful financial weapon, keep reading!

What Is A Tax Lien?

A tax lien is simply a claim that the government makes on your property to secure payment of your outstanding taxes. If you don’t pay your taxes, the government can file a lien against you, which gives them the right to seize and sell your property to recoup the money you owe. Tax liens can be placed on both real estate (such as your home) and personal property (such as your car or boat).

Types Of Tax Lien

While a tax lien may sound like something to be avoided at all costs, it’s important to understand that not all liens are created equal. There are two types of tax liens:

Voluntary Liens

Voluntary liens are a type of debt agreement between a borrower and a lender. In a voluntary lien, the borrower agrees to give the lender the right to seize certain assets if the borrower defaults on the loan. Voluntary liens are often used by businesses to secure financing from banks or other lenders.

Involuntary Liens

Involuntary liens are legal claims that can be placed on your property by someone other than yourself. This can happen if you fail to pay a debt, or if you are involved in a lawsuit. Involuntary liens can often be imposed without your knowledge, which is why it’s important to stay up-to-date on your financial obligations. If you have an involuntary lien placed on your property, it can adversely affect your ability to sell or borrow against the property.

How Does A Tax Lien Work?

Do you ever wonder how tax liens work? Many people don’t know the ins and outs of this complex process. Here’s a quick rundown of how it works:

  • A tax lien is a legal claim that the government makes on your property when you don’t pay your taxes.
  • When a taxpayer fails to pay their taxes, the government can place a lien on their assets. This means that the taxpayer cannot sell or borrow against their property until the lien is paid off.
  • Tax liens are usually filed by the IRS, but state and local governments may also file tax liens.
  • When a tax lien is filed, it’s a public record, which means it will show up on your credit report and make it difficult to get loans or buy property.
  • If you do manage to get a loan, you’ll likely have to pay a higher interest rate because of the lien.
  • You can try to negotiate with the government to pay off the debt over time or accept a smaller payment, but if you can’t reach an agreement, the government may seize your property.
  • The government can also auction off the lien to investors. The investor then becomes responsible for collecting the debt from the taxpayer. If the debt is not paid, the investor can foreclose on the property.

How To Stop Tax Lien?

The good news is that there are ways to remove both voluntary and involuntary tax liens from your property.

  • Make sure you file your taxes on time. This is the number one way to avoid a tax lien. If you fall behind, the IRS may file a tax lien.
  • If you can’t pay your taxes in full, plan and set up a payment plan with the IRS. This will help you avoid penalties and interest, and will keep you from getting a tax lien.
  • Keep good records of your payments. This will help you prove that you’ve paid your taxes if there is ever any question.
  • Once the debt is paid in full, the lien will be released and you’ll be free and clear.
  • You can use what’s known as a “lien release.” This occurs when the IRS agrees to release the lien without being paid in full, though this is relatively rare.

Myths About Tax Liens

There are many myths about Tax Lien that can confuse property owners. Here are some of the most common myths and the truth behind them:

Myth #1: The Government Can Take Your Property If You Don’t Pay Your Taxes.

This is simply not true. While the government does have the right to seize property for back taxes, they rarely do this to primary residences. In most cases, the government will work with you to set up a payment plan or offer other options before resorting to seizure.

Myth #2: Tax Liens Ruin Your Credit Score.

Again, this is not true. A tax lien will stay on your credit report for seven years, but it will have a lesser impact on your score after the first few years. Additionally, you can take steps to remove the lien from your credit report once it has been paid.

Myth #3: You Can’t Sell Your Property If There Is A Tax Lien On It.

This is not true. While a tax lien does put a cloud on the title of your property, it does not prevent you from selling it. You will just need to work with the buyer to pay off the outstanding balance before the sale can be completed.

Myth #4: Tax Liens Are Public Records.

While tax liens are public records, they are not as easily accessible as some people think. In most cases, you will need to go to the county courthouse to view tax lien records. Additionally, many states now allow property owners to opt-out of having their tax liens made public.

Myth #5: You Can’t Get A Loan If You Have A Tax Lien On Your Property.

This is not always true. While some lenders may be hesitant to provide financing for properties with tax liens, many others specialize in this type of lending. You will just need to shop around and find a lender that is willing to work with you.


Tax liens are not a fun experience, but by understanding how they work and your options, you can avoid them or take the necessary steps to remove them. If you do find yourself with a tax lien, make sure to speak with a qualified professional to help you navigate this difficult situation. Thanks for reading!

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