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Federal Tax Lien Collection Actions in Detail (Part I)

Federal Tax Lien Collection Actions in Detail (Part I)

What is a federal tax lien? A lien is a legal claim against all your current and future property. When you don’t pay your first bill for taxes due, a lien is created by law and attaches to your property. It applies to property (such as your home and car) and to any current and future rights you have to property.

What is a Notice of Federal Tax Lien? A Notice of Federal Tax Lien gives public notice to creditors. The IRS files the Notice of Federal Tax Lien so they can establish the priority of their claim versus the claims of other creditors. The Notice of Federal Tax Lien is filed with local or state authorities, such as county recorder of deeds or the Secretary of State offices.

If a Notice of Federal Tax Lien is filed against you, it may be reported by consumer credit reporting agencies. This can have a negative effect on your credit rating and make it difficult for you to receive credit (such as a loan or credit card). Employers, landlords and others may also use this information and not favorably view the fact that a Notice of Federal Tax Lien has been filed against you. However by law, there will be no filing of the Notice of Federal Tax Lien and no levies issued to collect an individual shared responsibility payment associated with the Affordable Care Act.

Next week: What to do if a Notice of Federal Tax Lien is filed against you.

(IRS Publication 594 and IRS.gov) (TTT 02/04/2020)