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.

BREAKING DOWN 'Tax Lien'

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.

RELATED TERMS
  1. Encumbrance

    A claim against a property by a party that is not the owner. ...
  2. Self-Directed IRA - SDIRA

    A retirement account in which the individual investor is in charge ...
  3. Silent Automatic Lien

    A lien that does not appear in any public record. This is a method ...
  4. Back Taxes

    Taxes that have been unpaid in the year that they were due. Taxpayers ...
  5. Tax Service Fee

    A legitimate closing cost used to ensure that mortgagors pay ...
  6. Lien

    The legal right of a creditor to sell the collateral property ...
Related Articles
  1. Entrepreneurship

    How to Obtain Your Federal Business Tax ID

    Learn how an eligible business obtains a federal tax identification number or employer identification number from the IRS by mail, by fax, by phone or online.
  2. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  3. Taxes

    Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  4. Home & Auto

    Should You Buy A House At Auction?

    The traditional real estate market isn't the only place to conduct your home search. Auctions also bring many buying opportunities.
  5. Taxes

    IRS Asset Seizures: Could It Happen To You?

    If you can't pay your taxes, know that the IRS has many avenues for collecting what you owe.
  6. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  7. Taxes

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  8. Retirement

    Retirement Plan Tax Prep Checklist

    Here's a list of items you need to have in order by tax time, including paying attention to those pesky required minimum distributions.
  9. Credit & Loans

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
  10. Home & Auto

    What to Do When You Can No Longer Afford Your Car

    Life is full of unexpected and undesired events, like layoffs or divorce. Unfortunately, these events can sometimes make your car payment unaffordable.
RELATED FAQS
  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. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center