June 24, 2024

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What is a tax lien, and how does it function?

2 min read
a tax lien

A tax lien is a legal claim that the government can make on the property of a person or company that owes taxes but has not yet paid them. A lien is a sort of security interest placed on property to ensure payment of a debt, such as a loan or, in this example, taxes. If the loan is not completely repaid, the creditor may seize the property.

Tax Liens Are Permitted

The federal or state government may place a tax lien on a property if the owner fails to pay delinquent taxes when due. The local government might place a lien on your property if you fail to pay your property or income taxes.

Due to the lien, there is no assurance that the house will be sold. Instead, it ensures that the tax authorities are paid before any other creditors who have assets to claim.

How to Register a Tax Lien

The process begins when the taxpayer is informed of the amount owed. A message consists of a notice and demand for payment.

If a taxpayer owes taxes to the IRS and refuses to pay or negotiate a settlement, the IRS may place a lien on the taxpayer’s property.

This lien is placed on all of the taxpayer’s assets, financial or otherwise. The lien also applies to any property acquired by the taxpayer during the lien period. Additionally, it applies to all of the corporation’s assets and receivables.

If a taxpayer declares bankruptcy, the lien and the remaining tax may still exist. By filing for bankruptcy, most debts can be eliminated, but federal tax obligations cannot.

What happens if you don’t pay your taxes?

As a tax lien, the government has the right to take property from people who haven’t paid their taxes.

Unlike a lien, which protects the government’s claim or interest in the property, a levy gives the government the right to take and sell the property to pay off a tax debt.


Tax liens are visible to the public after they are no longer valid. As soon as the tax debtor settles the bill, the lien will be erased from the county’s files.

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