Silent Automatic Lien

Silent Automatic Lien

Investopedia / Julie Bang

What Is a Silent Automatic Lien

Silent automatic lien is a term that refers to a lien that does not appear in any public record.

The Internal Revenue Service uses silent automatic liens to collect unpaid taxes when less drastic measures, such as sending letters to the delinquent taxpayer, have failed.

Key Takeaways

  • Liens are the government’s legal claim against your property when you neglect or fail to pay a tax debt.
  • A silent lien is a lien that is not made public.
  • An automatic lien (like an estate lien) is one that is triggered automatically, as in the death of a taxpayer.

How a Silent Automatic Lien Works

A silent automatic tax lien is one of two types of tax liens. Also known as an automatic tax lien, this differs from a federal tax lien, which is public. 

A federally authorized lien against any and all assets of a taxpayer who has unpaid back taxes, the public federal tax lien allows the 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. It is important to note that 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.

Because it is part of public record, 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 improve their credit.

How to Get Rid of a Silent Automatic Lien

There are four ways to get rid of a silent automatic lien:

  • paying the taxes owed
  • declaring bankruptcy
  • waiting out the time limit for collections
  • negotiating an agreement with the IRS (called an offer in compromise)

The offer in compromise is a program offered by the IRS to taxpayers who are unable to pay their tax debt. It can help an individual pay less than the amount that they owe to the IRS and is intended to allow taxpayers with substantial back taxes to settle their tax debt and start over with a clean slate so that they can remain current on their taxes moving forward.

If the delinquent taxpayer's taxes remain unpaid, the IRS can use a tax levy to legally seize the taxpayer's assets. The IRS is able to levy any of the taxpayers’ assets, such as bank accounts, investment accounts, automobiles, and real property in order to collect the money owed.

While a lien secures the government’s interest or claim in an individual’s or business’ property when the tax debt remains unpaid, a levy actually permits the government to seize and sell the property in order to pay the tax debt.

A levy differs from a lien because a levy takes the property to satisfy the tax debt, whereas a lien is a claim used as security for the tax debt. A levy is the legal seizure of the property or assets.

In the U.S., the Internal Revenue Service has the authority to levy an individual's property, such as a car, boat, house, wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, commissions or the cash loan value of a life insurance policy.

Article Sources
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  1. Internal Revenue Service. "5.17.2 Federal Tax Liens." Accessed Feb. 10, 2021.

  2. Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Feb. 9, 2021.

  3. Taxpayer Advocate Service. "Fiscal Year 2017 Objectives Report to Congress — Volume Two," Pages 63-64. Accessed Feb. 9, 2021.

  4. Internal Revenue Service. "Bankruptcy." Accessed Feb. 9, 2021.

  5. Internal Revenue Service. "Guidelines for Processing Notice of Federal Tax Lien Documents," Page 4. Accessed Feb. 9, 2021.

  6. Internal Revenue Service. "Offer in Compromise." Accessed Feb. 9, 2021.

  7. Internal Revenue Service. "Levy." Accessed Feb. 9, 2021.

  8. Internal Revenue Service. "What's the Difference Between a Levy and a Lien?" Accessed Feb. 9, 2021.

  9. Internal Revenue Service. "What Is a Levy?" Accessed Feb. 9, 2021.

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