Home | Federal Tax Liens: What Do They Actually Mean?

941 Tax Debt Solutions

Sep 04, 2023

Every taxpayer in the United States of America has a groomed fear of the Internal Revenue Service. Upon mention of the federal government agency’s name or notorious initials, one is instantly reverted to something akin to a misbehaving child getting called down to the principal’s office in elementary school. As mentioned in one of our recent blogs, the IRS has done an excellent job feeding this type of reputation. After all, our compliance with required tax obligations depends on that fear “inspiring” us to be honest with our tax reporting, whether for personal income tax, business income tax, or payroll taxes.

Most, if not all, of you are familiar with the term “lien.” According to Merriam-Webster, a lien is “a charge upon real or personal property for the satisfaction of some debt or duty ordinarily arising by operation of law.” The IRS uses the filing of tax liens as a tool to protect the government’s interest in being paid for the past-due tax liabilities owed.

In order for the IRS to execute and record a tax lien, three requirements must be met:

  • A tax assessment has been made,
  • A demand for payment has been made, and
  • The taxpayer has neglected the demand or refused to pay.

Once the IRS files a tax lien, it doesn’t just apply to physical property such as a residence or commercial building; it attaches to ALL property or rights to property owned by the taxpayer or acquired by the taxpayer during the life of the lien, including but not limited to vehicles, boats, business equipment, inventory, etc.

So, how does a tax lien get recorded? The IRS will execute the document, Form 668(Y), and submit it to the County Clerk’s Office applicable to the last address registered with the IRS either through the address reported on the last tax return filed or a formal change of address submitted. Once the County Clerk’s Office processes the tax lien, it becomes a public record, and anyone can secure a copy. With this recording, it becomes fodder for all the telemarketing and list-making companies that cater to the tax debt resolution industry. At this point, I recommend letting all calls go to voicemail unless you are familiar with the number on your caller ID or face call after call that starts with, “So you have a tax debt…”

How does a tax lien impact a taxpayer? This depends on whether the taxpayer is an individual or a business. Let’s look at the main areas of concern:

  • Assets: This is always the most concerning impact of a tax lien as it inherently attaches to everything the taxpayer owns, whether an individual or a business. Now, this doesn’t mean that if the taxpayer who owes the debt decides to have a garage sale or sell some inventory, an IRS Agent will show up and take all the proceeds. And it doesn’t necessarily mean they will take action to seize your vehicle out of your driveway, but it DOES give the agency the right to take that action if all other attempts to collect the debt fail.
  • Credit: The tax lien may impact the taxpayer’s ability to secure lending once on record. We find the most significant impact occurs for equipment or property financing and credit card approvals for business taxpayers, and property loans for individual taxpayers.
  • Government Contracts: For a business that depends on government contracts, the tax lien can cause the terms of the contract to be voided and/or can prevent new contracts from being awarded.

What to do if you or your client receives notice from the IRS that a tax lien has been filed? Keep in mind that each tax lien document can reflect up to 15 different tax liabilities, meaning that they are typically recorded after the past-due taxes owed have been building for a while. It is essential that the notice is not ignored and that the taxpayer takes action to begin addressing the tax debt. The sooner the taxpayer or an experienced tax professional contacts the IRS and begins taking steps to resolve the taxes owed, the better. Failure to do so will lay the foundation for the IRS to justify taking aggressive collection actions such as bank account levies, accounts receivable levies, payroll garnishments, federal payment levies, asset seizure, and more.

If the thought of handling the tax debt issues on your own causes heartburn, contact the team at Golden Lion Tax Solutions. With over two decades of experience successfully handling tax liens and defending our clients from all the authority they give the IRS to aggressively collect on past-due tax debts, we are the steadfast and reliable professionals to produce the best results for you!


Trust. Protection. Wisdom.

Your future and your family deserve the right protection. Golden Lion Tax Solutions will be your advisor and confidant throughout the entire journey. We guarantee to offer you or your business best-case solutions for your tax debt. We are by your side every step of the way. Start now and get your life back.

For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.