A federal tax lien arises automatically if you don’t pay the amount due after receiving your first bill. The government also may file a Notice of Federal Tax Lien (NFTL) in the public records.
- This notifies creditors the IRS has a claim against all your current and future property; and
- The NFTL may appear on your credit report and may harm your credit rating;
- To reduce the harm to your credit rating read Releasing a Lien and Withdrawing a Lien in the What should I do? Section.
- Note: In 2018, tax liens were removed from consumer credit reports however they may still be found under a public records search.
Generally, within five business days of filing the NFTL, the IRS will send you a Notice of Your Right to a Collection Due Process Hearing. You’ll have until the date shown on the notice to request a Collection Due Process (CDP) hearing with the Office of Appeals. See Publication 1660, Collection Appeal Rights, for a full explanation of the CDP process. At the CDP hearing, you may raise many issues which include proposing another way to pay your debt, and in some cases, to contest the debt itself.
Once a lien arises, the IRS generally can’t release it until you’ve paid the tax, penalties, interest, and recording fees in full or until the IRS is no longer legally able to collect the tax. However, in certain circumstances, explained below in the What should I do? section, a lien may be withdrawn, discharged, or subordinated.
Releasing a Lien
The IRS will release the lien once you pay the debt – either in a lump sum or over time. However, if the IRS releases a lien, it may remain on your credit report for many years. A lien withdrawal, discussed below, however, removes the lien from your credit report.
Withdrawing a Lien
If the Notice of Federal Tax Lien (NFTL) included on your credit report is causing you a problem, you can apply to have the notice withdrawn if you meet any of the criteria listed below. This means it’ll be removed from your credit report, as if the lien had never occurred.