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Tax Lien

*This article is intended for informational purposes only, and should not be construed as legal advice.

The general public doesn’t always comprehensively understand the terms that are used in a courtroom setting. Legislative terms deepen in their complexity, as each term can be used to represent different intentions and behaviors.

The term “tax lien” may not reflect a behavior, but its meaning is not always what the general public might initially expect. If you find the term “tax lien” during a PeopleFinders criminal records check, make sure you have the context of the word at hand. Without a comprehensive definition, you may misunderstand some of the data with which you’ve been presented.

You may have heard of a contractor's (or mechanic's) lien, but what is a tax lien? Generally, it is a legal claim against an asset or assets in order to guarantee the payment of a debt or the performance of some obligation.

What is a Tax Lien?

Liens are legal documents that award another party – be that a person or an institution – the right to property you own. One example of a lien includes a mortgage, wherein you’re paying off a bank to maintain your home.

Tax liens, specifically, involve governmental bodies. These liens are legal documents that guarantee that your debt to the IRS, local or state government will be paid through the cessation of unpaid tax money. The IRS or applicable body will demand that you pay your tax lien before any other debt you may owe. These liens also attach themselves to all of your existing assets, making it extremely difficult for you to manage your financial life until the debt is paid.

Where Do Tax Liens Come From?

If you’ve failed to pay some of your taxes over the course of a fiscal year, you could find yourself on the receiving end of a tax lien. The IRS, a local government or a state government can all call for you to engage in a lien if they believe you’ve shorted the taxes you owe them.

What Is the Lien Process?

The IRS will take three steps before imposing a lien on someone. These steps include:

  1. An assessment of a taxpayer’s debts
  2. The issuing of a payment notice, which will elaborate on the tax debt while including a demand that it be paid
  3. The issuing of a Federal Tax Lien

How Can You Avoid a Tax Lien?

If you want to avoid a tax lien, you need to pay your taxes by April 15 of every year, or work within a formally filed extension. (Note that small businesses and corporations may have different tax submission dates). However, if you simply don’t have the funds to pay your taxes, there are a few other paths you can take to avoid a lien. These include:

  • File for Property Discharge – a property discharge allows you to sell off your property without the limitations placed on it by the lien. This will enable you to gather the funds to pay the taxes you owe.
  • Use a Certification of Subordination – a certification of subordination will let you secure your credit lines and take out loans that might help you pay your taxes.
  • Apply for Lien Removal – if you can get your lien removed, it will be cleaned from your record, and your lines of credit will be restored.

How Do You Remove a Tax Lien?

If you’re looking to disentangle yourself from a lien, you can take one of several different paths, including:

  • Pay It – If there is no way for you to contest a lien, it’s your responsibility to pay it off. Once you pay the debts, you’ll be able to remove your lien from your record. Alternatively, you can sell the property attached to your lien to see it immediately removed with the assistance of a property discharge.
  • Use a Certification of Subordination – If you don’t have enough money to pay off your lien, and you don’t want to sell the property you have attached to it, you can try to negotiate with the creditor who issued you the lien. The IRS may accept a lump sum as opposed to a stretched-out payment simply to move on from the lien.
  • Apply for Lien Removal – If the IRS refuses to acknowledge that a lien may be illegitimate, you may have to take the holder to court.

What Does It Mean If a Tax Lien Appears on a Criminal Records Report?

If a PeopleFinders criminal records report notes that your subject has a tax lien on file, that means that your subject has had unpaid taxes collected by the IRS, a local government or a state government. You’ll need to read the report closely to see if that tax lien continues to impact your subject’s life or if it has since been removed.