By filing a Notice of Federal Tax Lien (Form 668Y), the government makes a legal claim to a taxpayer’s property as security or payment for a tax debt, serving as public notice to other creditors that the government has a claim against your property.
Tax Tip – A lien can affect a taxpayer’s credit rating, so it is critical to arrange the payment of tax debt as quickly as possible.
If there is a IRS tax lien on your home, you must satisfy the lien before you can sell or refinance your home. If you have equity in your property, the tax lien is often paid out of the sales proceeds at the time of closing.
Tax Tip – If the home is being sold for less than the lien amount, the taxpayer can request the IRS discharge the lien to allow for the completion of the sale or ask that the lien be made secondary to the lending institution’s lien to allow for mortgage refinancing or restructuring.