Tax Lien


DEFINITION of 'Tax Lien'

A legal claim by a government entity against a noncompliant taxpayer's assets. Tax liens are a last resort to force an individual or business to pay back taxes. To get rid of a lien, the taxpayer must pay what he or she owes, get the debt dismissed in bankruptcy court or reach an offer in compromise with the tax authorities. Federal and state governments may place tax liens for unpaid federal or state income taxes, while local governments may place tax liens for unpaid local income or property taxes.


If the taxes remain unpaid, the tax authority can then use a tax levy to legally seize the taxpayer's assets (such as bank accounts, investment accounts, automobiles and real property) in order to collect the money it is owed. Tax liens are publicly recorded and may be reported to credit agencies. These two features of tax liens effectively prevent the sale or refinancing of assets to which liens have been attached, and prevent the delinquent taxpayer from borrowing money.

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  1. How do I avoid a tax lien on my property?

    The best way to avoid a tax lien on your property is to make sure you pay all your state, municipal and federal taxes in ... Read Full Answer >>
  2. What types of liens are seen as good and which are bad for my credit?

    Creditors that allow purchases to be made through financing often require property to be pledged against a credit account; ... Read Full Answer >>
  3. How can I invest in tax liens?

    An individual can invest in tax liens by identifying available liens and then participating in auctions where property tax ... Read Full Answer >>
  4. What is the difference between a lien and an encumbrance?

    A lien represents a monetary claim levied against property to secure payment of an obligation of the property owner, while ... Read Full Answer >>
  5. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Full Answer >>
  6. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>

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