Federal Tax Lien

Anyone out there looking for another reason to pay their taxes, we've got you. Gather ‘round; it’s story time.

Once upon a time, in a land somewhere in the United States, a guy named Guy owned a house. And one day Guy decided he didn’t want to pay his taxes anymore. “Nope,” he said, “no taxes for me.” He ignored the letters and phone calls from the IRS and went skipping merrily to work and home, until all of a sudden, one day, he came home to find a notice stuck to his front door. It was a public document stating that the federal government now had a legal claim on Guy’s house.

OMG, Guy, what happened?! Well, we’ll tell you.

That document is what’s known as a federal tax lien, and basically, it says that if we don’t pay our taxes, the government is going to take what they are owed from us via our personal property. Our real estate, financial accounts, and other valuable possessions are all subject to federal tax liens. If we try to sell personal property that has a lien on it, the IRS will take whatever we owe out of the sale price. Liens can be placed on a business, too, if said business is delinquent on its taxes. Liens can negatively affect our credit, our ability to take out loans, and even our ability to refinance credit cards we already have. In other words, liens can wreak havoc on our financial lives and are generally bad news and totally un-fun.

The best way to avoid getting into a federal tax lien situation is to—surprise!—pay our taxes in full and on time. But if we do find ourselves in a bit of a lien pickle, a financial advisor should be able to help us figure out how to get through it.