Many taxpayers may have heard of a tax lien before, but they don't understand what the lien actually entails, such as the consequences of it being associated with your record. So what is a tax lien, and what does it mean for a taxpayer that is unfortunate enough to have it stuck to his or her record? Let's investigate further.
In it's simplest terms, a tax lien is a mark on your assets or record that is filed by the IRS. This mark states that the IRS has a legitimate claim against you because you owe back taxes or tax debt. Once the lien is attached to your property or assets, it will be very difficult for you to maneuver financially. The asset or property in question can't change ownership, and the person involved in the lien won't be able to secure new lines of credit.
The lien will remain on your record until you fulfill your tax obligation, and it will sully your credit report until it is removed.
Even though the lien is a damaging factor for taxpayers, the IRS must follow proper protocol when enacting the lien -- otherwise they risk compromising their lien.
You also have some appeals and actions in your arsenal to combat the IRS. You could file for a discharge of property, which would allow you to sell the piece of property as if the lien were not attached. You could apply for "subordination," which essentially acknowledges the lien but allows the taxpayer to give the IRS lower priority when it comes to paying back debt. Or, you could apply to withdraw the lien from your record.
Source: FindLaw, "What is a Tax Lien?," Accessed Aug. 26, 2015