Understanding collection actions

Federal Tax Lien. A legal claim against all your current and future property, such as a house or car, and rights to property, such as wages and bank accounts. The lien automatically comes into existence if you do not pay your amount due after receiving your first bill. When you don’t pay your first bill for taxes due, a lien is created by law and attaches to your property.

Notice of Federal Tax Lien. A public notice to creditors. It notifies them that there is a federal tax lien that attaches to all your current and future property and rights to property.

A Notice of Federal Tax Lien gives public notice to creditors. The IRS files the Notice of Federal Tax Lien so they can establish the priority of their claim versus the claims of other creditors. The Notice of Federal Tax Lien is filed with local or state authorities, such as county recorder of deeds or the Secretary of State offices.

If a Notice of Federal Tax Lien is filed against you, it’s often reported by consumer credit reporting agencies. This can have a negative effect on your credit rating and make it difficult for you to receive credit (such as a loan or credit card). Employers, landlords and others may also use this information and not favorably view the fact that a Notice of Federal Tax Lien has been filed against you.