Tax Lien Attorney

What a federal tax lien is, and when it becomes public

The federal tax lien exists the moment a tax is assessed and unpaid, and it becomes a public record only when the IRS files a Notice of Federal Tax Lien. Under section 6321 of the Internal Revenue Code the lien attaches to all of your property and rights to property, including what you acquire later, and under section 6322 it lasts until the balance is paid or the collection statute expires. Nobody else knows about it until the IRS files Form 668(Y), the Notice of Federal Tax Lien, with the county recorder for real property or the Secretary of State for everything else, under section 6323. That filing is what a title company sees, and it puts the IRS ahead of anyone who lends against the property afterward. The IRS generally does not file below a $10,000 balance.

The lien does not take anything; a levy does, and our tax levy attorney page covers that. But the lien follows the property, so a house cannot change hands with clear title, a refinance stalls, and a business line of credit gets pulled until someone deals with it.

Letter 3172 and the 30-day hearing window

Letter 3172 is the notice that a Notice of Federal Tax Lien has been filed, and it carries a 30-day right to a Collection Due Process hearing under section 6320. The IRS has to mail it within five business days of filing, and the deadline to request the hearing on Form 12153 is printed on the letter. The CP504 notice that comes earlier warns that a lien may be filed but carries no hearing right, and the LT11 or Letter 1058 is the levy notice under section 6330, a separate right on a separate clock. At a lien hearing you can argue that the filing was premature or against procedure, propose an installment agreement or an offer in compromise, ask for withdrawal, and, if Appeals gets it wrong, petition the Tax Court within 30 days. Miss the window and you can still request an equivalent hearing within a year, without the Tax Court backstop, or a Collection Appeals Program review on Form 9423.

On credit, the facts changed in 2018 when the three national credit bureaus stopped reporting tax liens, so the lien will not appear as a tradeline. Mortgage lenders and title companies search the public record instead, and they find it every time.

Four ways to deal with an IRS tax lien

Release, withdrawal, discharge and subordination are four different applications on four different forms, and choosing the wrong one costs weeks you may not have.

• Release. Under section 6325(a) the IRS issues a Certificate of Release, Form 668(Z), within 30 days after the balance is paid, the statute expires or a bond is accepted. Paying through escrow is the usual route.
• Withdrawal. Form 12277 under section 6323(j) removes the notice from the public record as if it had not been filed, though the debt remains. The IRS grants it when the filing was premature or not by the book, when withdrawal will help the IRS collect, or when you owe $25,000 or less on a direct debit installment agreement that pays in full within 60 months, have made three consecutive payments and have not defaulted.
• Discharge. Form 14135 under section 6325(b) removes one property from the lien so it can be sold while the lien stays on everything else. The IRS agrees when it is paid its share from escrow, when the property has no equity after senior loans, or when the price is fair and the proceeds are held for it. Publication 783 lists the exhibits, and the IRS asks for 45 days before closing.
• Subordination. Form 14134 under section 6325(d) lets a new lender step ahead of the IRS. It is the refinance tool: the IRS agrees when the new loan lowers your payment so you can pay more toward the tax, or when the cash out comes to the IRS. Publication 784 covers it.

Timing, honestly stated: Advisory, the IRS unit that decides discharges and subordinations, usually answers a complete application within 30 to 60 days in our experience, and a missing appraisal restarts the clock.

California tax liens: FTB, EDD and CDTFA

A California state tax lien arises automatically when a liability becomes due and payable, and once recorded it stays enforceable for ten years, with extensions. For the FTB the lien comes from Revenue and Taxation Code section 19221, the EDD’s from Unemployment Insurance Code section 1703 and the CDTFA’s from Revenue and Taxation Code section 6757. Each agency records a Notice of State Tax Lien with the county recorder for real property or files it with the Secretary of State for personal property under Government Code section 7171, and the FTB’s version arrives as a Notice of Tax Lien (FTB 4921). Under Government Code section 7172 the recorded lien runs ten years and can be extended by re-recording; the CDTFA renews twice, so a sales tax lien can sit for 30 years.

The state remedies are narrower than the federal ones, because there is no hearing right and no withdrawal. Under Government Code section 7174 an agency can release part of the property or subordinate the lien when collection is not jeopardized, and it has to record a release within 40 days after the balance is paid. In escrow the FTB works through its eDemand payoff system, the EDD requires certified funds before title transfers, and the CDTFA will hold off filing a lien when a payment plan clears the balance within a year. The mechanics are in our FTB collections guide.

What we do, and what to gather

Most lien work is a transaction with a deadline, so we run it backward from the closing date. First we file Form 2848 or the California power of attorney, pull the transcripts, and confirm the balance and the statute date under section 6502. Second we pick the tool: payoff through escrow if the equity covers it, discharge or subordination if it does not, withdrawal if an installment agreement fits. Third we assemble the application, and this is where you come in: the recorded notice from the county, the purchase contract or loan estimate, the preliminary title report, an appraisal or a broker’s opinion of value, payoff demands from every senior lender, the estimated closing statement and, for a subordination tied to an installment agreement, a Form 433-A financial statement. Fourth we work Advisory or the state collector until the certificate issues, and we talk to the escrow officer directly so the file does not die in a voicemail. A lien only goes away for good when the debt does, and that work is on our tax debt attorney page.

Can I sell my house with an IRS tax lien on it?

Yes. If the equity covers the balance, the IRS is paid from escrow and releases the lien under section 6325(a). If it does not, we apply for a discharge on Form 14135 so the property leaves the lien and the sale closes, with the IRS taking whatever share of the proceeds the numbers support.

Does an IRS tax lien show on my credit report?

Not since 2018, when Equifax, Experian and TransUnion stopped reporting tax liens. Lenders find the Notice of Federal Tax Lien in the county records anyway, and a mortgage underwriter treats it as a debt that has to be paid, discharged or subordinated before funding, so the practical effect on borrowing is real.

How do I get an IRS lien withdrawn?

File Form 12277 under section 6323(j). The common path is a direct debit installment agreement on a balance of $25,000 or less that pays in full within 60 months; after three consecutive payments the IRS withdraws the notice. Withdrawal also applies when the filing was premature, or after release with three years of clean filing.

How long does a California tax lien last?

Ten years from recording under Government Code section 7172, and the FTB, the EDD and the CDTFA can extend it by re-recording before it lapses. The FTB’s underlying right to collect runs 20 years under Revenue and Taxation Code section 19255, so a California lien rarely expires before the debt is paid.