What is a Tax Lien? Why the IRS Uses Liens

A tax lien is imposed by the IRS as a way of collecting payment of taxes. A lien can be imposed for a number of reasons including not paying income taxes, or taxes owed on real estate, etc. Simply put, a federal lien is a way for delinquent taxes to be collected when the taxpayer is not cooperating. It is much better to cooperate with the entity that you owe taxes to than it is to deal with a tax lien.

Tax liens on real estate are often times confusing. This is because the lien stays with the home instead of the person who did not pay the taxes. In theory, you could buy a home with a lien against it and then be responsible for paying the taxes. This is not something that you should want to do, but it does happen from time to time. Those buying a home need to be very careful when checking out the property. If there is a lien on the home you want to buy you need to think long and hard about what this means.

A federal tax lien is imposed by the IRS and is used to collect a variety of tax including income tax, gift tax, etc. Sec 6321 Lien for Taxes in the IRS code explains this in a simple to understand format: If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or asses sable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person.