Guidance on the Legal Implications of a Federal Tax Lien and Strategies to Remove or Avoid Them
For homeowners struggling with back taxes, few things are more alarming than discovering that the IRS has filed a tax lien against their property. A federal tax lien is the government’s legal claim against your home and other assets when you neglect or fail to pay a tax debt. If not addressed promptly, it can severely impact your financial standing, credit report, and ability to sell or refinance your home.
At Tax Law Advocates, we help clients across the country resolve serious tax issues, including IRS liens. In this guide, we’ll explain exactly what an IRS tax lien is, how it can affect your home, and—most importantly—how you can protect your property through smart legal and financial strategies.
What Is an IRS Tax Lien?
An IRS tax lien is a legal claim by the federal government against your property due to unpaid tax debt. It arises after the IRS assesses your liability, sends you a bill, and you fail to pay the amount owed. Once a lien is filed, it attaches to all your current and future assets, including:
- Your primary residence
- Investment properties
- Vehicles
- Bank accounts
- Business property and accounts receivable
The lien does not mean the IRS will immediately seize your property—that’s a levy, a separate collection action. But a lien is a powerful tool that allows the IRS to establish priority over other creditors and can create serious problems for homeowners.
How a Federal Tax Lien Affects Your Home
When the IRS files a Notice of Federal Tax Lien, it becomes public record and attaches to any real estate you own, including your primary residence. The lien serves as a warning to potential creditors that the IRS has a legal right to your property before anyone else.
Key consequences of a lien on your home include:
- Clouded Title – Selling or refinancing your home becomes difficult or impossible until the lien is resolved.
- Credit Damage – While federal tax liens are no longer listed on consumer credit reports, they are still visible during title searches and can affect mortgage applications.
- Limited Equity Access – A lien can block your ability to take out home equity loans or lines of credit.
- Risk of Forced Sale – In rare but severe cases, the IRS may seek a court order to sell your home and recover the debt.
This is why it’s crucial to act quickly if you receive a notice or suspect the IRS is preparing to file a lien.
How to Prevent an IRS Tax Lien
The best way to avoid a tax lien is to address your tax debt before it escalates. Here are strategies that can help:
Pay Your Tax Debt in Full
Paying your balance in full as soon as you receive notice from the IRS is the most direct way to avoid a lien. If you can’t afford a lump sum, consider borrowing from a private lender, using retirement savings cautiously, or liquidating assets.
Enter into an Installment Agreement
If you can’t pay in full, the IRS offers payment plans that allow you to make monthly payments over time. Entering into a formal agreement can delay or prevent the filing of a lien, especially if you act early.
In many cases, if your balance is under $50,000 and you agree to a Direct Debit Installment Agreement, the IRS may not file a lien at all.
Submit an Offer in Compromise (OIC)
An Offer in Compromise allows you to settle your tax debt for less than you owe, depending on your financial situation. While filing an OIC doesn’t automatically stop a lien from being filed, it signals to the IRS that you’re actively seeking a resolution.
Request “Currently Not Collectible” Status
If you can prove financial hardship, the IRS may place your account in Currently Not Collectible (CNC) status, pausing collection activity. While the lien may still be filed, CNC status prevents levies and buys you time to stabilize your finances.
How to Remove an IRS Tax Lien
If a lien has already been filed, don’t panic—there are several methods for removing it and restoring your financial flexibility.
Pay the Debt in Full
Once your tax debt is fully paid, the IRS will release the lien within 30 days. You’ll receive a Certificate of Release, which you can file with your county recorder to clear the title on your home.
Apply for a Lien Withdrawal
Even if you’ve entered into a payment plan or paid off your debt, you may be eligible to have the Notice of Federal Tax Lien withdrawn, which can remove it from public records.
To qualify for a withdrawal, you must:
- Be in compliance with other filing and payment requirements
- Have a debt of $25,000 or less (or agree to pay it down to that amount)
- Be in a Direct Debit Installment Agreement
You can request a withdrawal by submitting Form 12277 to the IRS.
Request a Lien Subordination
If you’re trying to refinance your mortgage or obtain a loan but a lien is in the way, you may request subordination, which doesn’t remove the lien but allows another creditor to move ahead of the IRS.
This strategy is often used to help homeowners refinance at lower rates, enabling them to stay current with payments and resolve their IRS debt faster.
Discharge of Property
In limited cases, you can request that the lien be discharged from a specific property (like your home), even if the lien remains on other assets. This typically applies if:
- You’re selling the property and the IRS will receive some or all of the proceeds
- You’re transferring the property to a spouse in a divorce settlement
- You’re refinancing and need a clear title
The process involves submitting Form 14135 and supporting documentation for IRS review.
How Tax Law Advocates Can Help You Protect Your Home
Dealing with a tax lien is more than just a paperwork issue—it’s a legal and financial risk that requires a strategic response. At Tax Law Advocates, we help clients across the country:
- Negotiate with the IRS to prevent liens from being filed
- Enter into tax resolution programs like OICs and payment plans
- Apply for lien withdrawals, discharges, or subordinations
- Respond to IRS notices and take action to stop levies and protect property
We know how to interpret IRS procedures and advocate for the best outcome based on your unique situation.
Call Tax Law Advocates Before It’s Too Late
If you’ve received a notice from the IRS or are concerned about a lien being filed against your home, don’t wait. The longer you delay, the more complicated—and expensive—your options may become.
Call Tax Law Advocates today at 855-612-7777 for a confidential consultation. Our experienced legal team will help you understand your options, protect your home, and work toward a permanent resolution of your tax issue.
Let us stand between you and the IRS—so you can move forward with peace of mind.