Federal Tax Lien

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DEFINITION of 'Federal Tax Lien'

A federally authorized lien against any and all assets of a taxpayer who has unpaid back taxes. The lien allows the Internal Revenue Service (IRS) to secure or otherwise requisition the taxpayer's property in order to secure payment. Federal tax liens can be assessed for unpaid taxes of any kind, including income, self-employment, gift or estate taxes.

BREAKING DOWN 'Federal Tax Lien'

Federal tax liens differ from tax levies in that they only denote the government's right to seize property, as opposed to the actual seizure of it. The IRS will often "perfect" a tax lien by filing notice with states and other creditors that it is first in line to receive payment for back taxes. Having a federal tax lien will substantially downgrade one's credit score, and in many cases this lien must be paid off in full before the taxpayer can obtain financing.

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RELATED FAQS
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    Most of us will shy away from doing our own tax returns, especially if it involves reporting capital gains or losses, education ... Read Full Answer >>
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    In the midst of WWII, the U.S. government ran into trouble funding the war effort. The problem did not originate from citizens ... Read Full Answer >>
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    This may come as a surprise to many individuals, but not everyone needs to file a federal tax return. According to the IRS, ... Read Full Answer >>
  4. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
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