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tax lien

What is a Tax Lien and Why Should Anyone Care?

October 17, 2014

Lien and levy are two terms the public hears quite often and typically within the same sentence. While both are collection measures taken by the IRS, they are very different. A levy often results in a taxpayer’s money being taken from his or her wages or a bank account. This is a simple enough concept to grasp. Liens, on the other hand, are very rarely understood by even those who have one placed against them. In reality, they are not actually all that complicated but can be incredibly problematic for the debtor.

What is a Tax Lien?

A lien occurs when the IRS secures their interest in your property in the event that your tax debt is not paid; you may think of your assets as collateral for the IRS. This includes anything you own at the time the lien is placed on you and everything that becomes yours while your tax debt remains unsatisfied. This includes your house, car, appliances, electronics, and most other physical possessions. This lien also extends to your share of a business.

Tax Liens & Your Credit Score

Many people don’t become concerned when they see that the IRS has a tax lien against them. They may not own much personal property, so they believe the lien won’t really affect them. Before 2018, an IRS tax lien would show up on your credit score, which could severely limit your ability to secure a loan or other credit. Although the credit bureaus no longer include tax liens on your credit report, a mortgage lender or other loan company may still learn about it through a public records search, which may result in being denied credit.

Liens & Employment

Liens have also been known to damage a person’s job opportunities. Careers that require a certain level of security clearance may not take on anyone with an IRS tax lien. In fact, someone who holds a job with the government can be let go because of tax debt. Other jobs, especially in the financial industry, want employees who have outstanding credit. Fortunately, there are things that can be done about IRS tax liens. It’s often in a person’s best interest to work with a reputable tax professional to see what their options are and create a plan to handle a lien.