Video: What is a Federal Tax Lien?
A federal tax lien is a hold placed on personal property if a person fails to make a tax payment. Avoid a federal tax lien with help from TurboTax in this video clip.
Video transcript:
Hello, I'm Jeremy from TurboTax.com with some information about federal tax liens.
Taxpayers who have unpaid income tax debts may end up having a tax lien placed on their personal property if they fail to ever make a payment. If you find yourself in this situation, you should know how a lien will affect you.
When the IRS places a tax lien on your property, such as your home, it now has a legal claim to that property but never for more than you owe.
- For example, if you owe the IRS $150,000 it can put a lien on your home that's worth $225,000.
- If you ever sell the home, the IRS can't take everything from you, only the first $150,000 that you are entitled to.
Although this may provide some comfort, the truth of the matter is that a lien makes selling your property much harder. Most buyers, especially those in the market for a home, may be scared off by the presence of an IRS tax lien because if they purchase it knowing one exists, the IRS can enforce the lien against them in the event you don't clear up your tax debt entirely.
Aside from paying your tax in full, the only way to get rid of the lien is when the property value is more than double the amount of tax you owe or when the property becomes worthless.
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