What Is a Tax Lien?

A Tax lien is a security interest that the government has in any real or personal property that the taxpayer owns. So what does that mean? In reality if you owe an obligation to the IRS or to the state, then a lien is the government's way of protecting its interest in case you were to liquidate any property. So let's take a house because that is the example that we run into most commonly for taxes. If you own a house and if the house has equity and the government puts a lien against it then when you go to sell that house the government is going to take its share of what you owe before you get any proceeds. So a lien is just simply protecting the government's interest saying "hey we're the IRS, we're the state of California, we have a right to the equity in this property prior to it being sold." So what a lien does those two things: number one it protects the government's interest and number two liens are a matter of public record so when a lien shows up, it has the tendency to either damage the taxpayer's credit or it could be discoverable.

So anybody who's applying for a government job or anything with security clearance or anything like that will have an issue with the lien. A lien can impact banking relationships, it can impact loans if your lenders find out about a lien, and particularly if you have a tax liability that you're not in compliance for, then a lien can be very very damaging. Where we run into this a lot is with people with professional licenses. If you have a place through FINRA or you have an FCC license, a lien can cause a lot of problems. If you're a fiduciary and you get a tax lien filed against you, the act of the lien getting filed against you means that or suggests that you may not be up to the task of being a fiduciary. So liens can be very damaging but let's call them what they are: it's just the government protecting its own interest by filing a piece of paper with the County Recorder in order to preserve their rights. They're not going to suck any assets out of you, they're not going to levy your bank statements.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law