What is a “Notice of Federal or State Tax Lien?”

Filing a Tax Lien against a taxpayer is the initial process by which the IRS or a State taxing authority will pursue collection activity for a tax debt. The affected taxpayer will have a claim placed against his or her assets, and be marked to all potential creditors as a citizen with an unpaid debt to the respective taxing authority. Therefore, the taxpayer will not be able to apply for any credits or loans, nor will he or she be able to sell any of the affected assets. If the affected assets are sold before the lien is removed, the buyer will incur the debt, decreasing the taxpayer’s ability to sell the assets. In essence, the lien prevents the taxpayer from making any profit by means of selling their affected assets.