What is a Tax Lien?
A tax lien is a claim made by the IRS on assets. It allows the government to be "first in line" to receive any money from a sale of an asset. If a tax lien is filed on one with no assets, the purpose is to alert creditors of the tax lien and to formally put the tax debt on the books. This allows the tax lien to attach to any property acquired after the filing. Although a tax lien does not involve the IRS taking any property or money from a taxpayer, it can cause significant problems in many ways.
How to Remove a Tax Lien
There are a few ways to remove a tax lien. The first way is to pay the tax debt in full. If that can't be done, certain situations allow for a release of tax lien.
One of the situations is when a tax lien is causing harm to your earnings potential. For example, if you're in the financial services industry and you fail a credit check that was necessary for a certain license, the IRS will remove the tax lien and the unnecessary hardship.
A tax lien could also be removed because the time to collect the tax debt has passed. The statute of limitation for a tax debt is 10 years. Once lapsed, the tax lien can no longer be enforced.
Tax Lien Subordination
If a tax lien cannot be removed, it is possible to subordinate a tax lien in certain situations.
For example, if you need to get a mortgage or trying to sell your home, the IRS will subordinate the lien and make other creditors ahead of them.
The rule of thumb is the IRS will subordinate a tax lien if doing so will increase the probability a tax debt will be paid.