IRS Notice of Federal Tax Lien
A Notice of Federal Tax Lien (NFTL) is an encumbrance that establishes a legal claim by the government. It does not result in the physical seizure of your property. A levy, on the other hand, allows the IRS to actually seize wages, cash, or property.
In general, a tax lien gives the IRS a claim against everything you own, from your home and car all the way to the rusted bicycle in your backyard. The lien also technically attaches to your wages, money in you bank accounts, your retirement accounts, and even the cash in your wallet.
A Federal Tax Lien also impacts your credit score, since it shows up on your credit report. Therefore, the tax lien can impact your ability to obtain loans, rent an apartment, and can even impact your insurance rates and ability to obtain employment if you are a job seeker.
In most cases, a tax lien will jump ahead of many other liens against your property after a 180 day period, unless a particular piece of property is used as collateral for a loan. For example, a tax lien does not jump ahead in priority position over a car loan or a first, second, or third mortgage against your home. It will, however, usually jump ahead of, say, a mechanic’s lien against your home.
You may have circumstances where having the lien released would be of benefit to helping you resolve the tax situation. There are three types of lien releases available to a taxpayer that may help you resolve tax liabilities with the IRS.