What is a Federal Tax Lien

The Federal Tax Lien is a public document that confirms the claim of United States in the title, right and interest of the taxpayer’s assets. Where this document is kept depends on the law locally, either at the County clerk’s office or at the Secretary of State’s office.

The Federal Tax Lien is a negative mark on the credit report of a debtor.  Many creditors ask for notes to check, once they know of this Federal Tax Lien (FTL.)

The Federal Tax Lien is considered to be the major claim against the assets of the debtor, excluding the first mortgage holders who have all their financing documents perfectly filed. The Federal Tax Lien may even shake the position of the factoring firms that lend on bank revolving lines of credit and on accounts receivable.

Local law in some jurisdictions allows separate filing of liens for personal property and any real property.  In such cases, two identical liens are filed by the IRS, one under the real property records and the other under the personal property records.  It is important to file both; otherwise it amounts to not perfecting the government claim on all assets.  If we are talking about a corporation as the debtor, failure to file, depending on the local law, may result in imperfect claim. 

The Federal Tax Lien is the main basis for the IRS for foreclosure of the assets of the debtor with seizure.  Ever since the 1998 IRS Reform Act, these seizures have reduced. You should not mistake the lien with the IRS levy.   The IRS has the power to levy on a debtor’s wages or accounts without a Federal Tax Lien. 

People can also appeal the filing of a Federal Tax Lien if they have a good reason to do so.  If you are able to confirm that the Federal Tax Lien will actually not help the government in recovering payments or that there is an incorrect tax assessment, you stand a chance to succeed.

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