Home Ownership and Federal Tax Liens

Federal Tax Lien

Author: Phillip Mixon

Even though culture and fads change from era to era, there is one thing that is possibly more American than apple pie and baseball combined: that is home ownership.  Home ownership is the cornerstone and foundation of why people can be convinced to toil from 9-5 all week: because they believe that one day, eventually, they will be able to achieve the ultimate goal of home ownership. In 2023, the pressure to keep and maintain a home has correspondingly increased as the cost of living increased.

Aside from unusually high interest rates, there is the elephant in the room that can bring your dreams of home ownership to a screeching halt: a federal tax lien. Through the filing of a Notice of Federal Tax Lien, the IRS alerts creditors that the government has a legal claim to your property. A federal tax lien does not happen overnight; it is typically the result of a long-standing pattern of non-payment.

Typically, a federal tax lien happens as follows:

  • The IRS assesses your tax liability.
  • The IRS sends you a bill that explains how much you owe in the form of a Notice and Demand for Payment.
  • After neglecting to fully pay or failing to enter into a payment plan, the IRS will file a Notice of Federal Tax Lien.

A lender (i.e., a mortgage company) will usually not lend to taxpayers with an active federal tax lien. Lenders are in the business of making money, and their risk increases substantially when the borrower has an IRS tax lien. If a borrower can obtain mortgage financing at all, the presence of the tax lien will likely result in much higher interest rates than normal.

The simplest way to get the IRS to release a federal tax lien is to pay the outstanding tax balance in full. This option, while it is the simplest, is likely not feasible for most people who find themselves under the pressure of a federal tax lien. Since most people are unable to pay in full the outstanding tax liability, the next best solution is to get in contact with a tax professional who can guide you through the many options available to release an IRS federal tax lien.

If you find yourself in the unfortunate situation of having an IRS tax line hanging over your head, please contact The Wilson Firm. We are tax lawyers who specialize in mitigating damage caused by tax non-compliance and would be happy to help you resolve your IRS tax lien so you can freely sell or purchase real estate.