When the topic of taxes comes up, one of the inevitable issues that will get discussed is the tax lien. Tax liens are commonly used by the IRS, but they can also be used by other parties and individuals. So what is a tax lien and how should you proceed if you are unfortunately targeted by one such a lien?
A lien is a legal claim made against an individual. It is placed on an asset or piece of property to compel that individual to pay whatever he or she owes — may that be tax debt or some other form of debt. Returning to a previous point, the IRS isn’t the only entity that can issue you a lien. If you have work done on your home, for example, then a workman’s lien could be utilized if you fail to pay the debt in a timely manner.
When a lien is placed on an asset or piece of property, then the individual can’t sell the asset or property, nor can he or she transfer ownership of the asset or property. Additionally, it will be very difficult to secure any new lines of credit under a lien.
For those that are under a lien, there are some steps you can take to act against the lien. You could file an order of subordination, which allows you to pay off other debts as opposed to having your IRS debt being prioritized under the order of a lien. You can appeal the lien outright. And you can ask for a discharge of the property, which effectively lets you sell the property as if the lien wasn’t even there.