How Long Does a Federal Tax Lien Attach to Real Property?

A federal tax lien is the government’s legal claim against a person’s property for unpaid tax debt. The lien protects the government’s interest by attaching to all of a taxpayer’s assets, including real estate, personal property, and financial holdings. It applies to property owned when the lien arises and any assets acquired during the lien’s duration.

The existence of a lien can affect your ability to sell property or secure credit. It encumbers the title of real property, meaning it cannot be sold or transferred with a clear title until the lien is addressed. Because the lien is a public record, it alerts other potential creditors to the government’s claim.

The Creation and Attachment of a Federal Tax Lien

A federal tax lien is created automatically after three conditions are met. First, the IRS must assess the tax liability by recording the amount owed. Second, the IRS must send the taxpayer a “Notice and Demand for Payment” that details the assessed tax and requests full payment. The final condition is the taxpayer’s failure to pay the debt within the specified timeframe.

Once these steps occur, the tax lien is created by law and attaches to the taxpayer’s property. This initial lien exists even before it is made public. To make the lien effective against third parties like lenders or buyers, the IRS files a “Notice of Federal Tax Lien” (NFTL) in public records, such as a county recorder’s office. This notice ensures that a title search will reveal the government’s claim.

The Standard Duration of a Federal Tax Lien

The duration of a federal tax lien is governed by the Collection Statute Expiration Date (CSED). The IRS has 10 years from the date a tax was assessed to collect the debt, and the lien lasts for this 10-year period. The clock starts on the date of the tax assessment.

Once the CSED ends, the lien becomes unenforceable, and the IRS can no longer take action to collect the debt. Although the lien’s legal power expires, the public Notice of Federal Tax Lien (NFTL) may not be removed from public records automatically. A taxpayer may need to request a Certificate of Release from the IRS to clear the public record.

The IRS may refile the NFTL before the collection period ends to maintain its priority against other creditors. This refiling does not extend the underlying 10-year CSED. The enforceability of the lien is always controlled by the CSED.

Events That Extend the Lien’s Duration

Certain actions can pause, or “toll,” the 10-year Collection Statute Expiration Date (CSED) clock. When the CSED is tolled, the time the IRS has to collect the tax is extended, and the lien remains attached to the property for a longer period.

Common tolling events include:

• Filing for bankruptcy, which pauses the CSED clock for the duration of the proceeding plus an additional six months.
• Submitting an Offer in Compromise (OIC), which suspends the CSED while the OIC is pending, during any appeal, and for 30 days after a final decision.
• Requesting an installment agreement or a Collection Due Process (CDP) hearing, which pauses the CSED while the request is being considered.
• Being continuously outside of the United States for at least six months, which extends the CSED for the duration of the absence.

Methods for Removing a Lien from Real Property

Taxpayers have several options to remove a lien from their real property, even before the CSED expires. These methods address different circumstances, such as selling a home or refinancing a mortgage, and each requires a specific application to the IRS.

Lien Release

A lien release extinguishes the public Notice of Federal Tax Lien (NFTL) entirely. This occurs when the tax debt is paid in full or when the lien becomes legally unenforceable upon the expiration of the CSED. Once the liability is satisfied, the IRS must issue a Certificate of Release of Federal Tax Lien within 30 days. This document is filed in public records to show the government’s claim has been removed.

Lien Discharge

A lien discharge removes the lien from a specific piece of property, allowing the owner to sell it with a clear title. This action does not eliminate the taxpayer’s overall debt, as the lien remains on all other assets. A discharge is common when a property is being sold, and the taxpayer must file an application with the IRS. The IRS may grant the discharge if the taxpayer pays an amount equal to the government’s interest in the property.

Lien Subordination

Lien subordination does not remove the tax lien but allows another creditor’s lien to move into a higher priority position. This is frequently used when a taxpayer needs to refinance a mortgage, as lenders may be unwilling to provide a loan that is secondary to a tax lien. Through subordination, the IRS agrees to let the new lender’s lien take priority. This can make it possible to secure refinancing to help pay the tax debt.

Lien Withdrawal

A lien withdrawal removes the public NFTL, so it appears the notice was never filed, but the underlying statutory lien and tax debt remain. The IRS may agree to a withdrawal if the NFTL was filed improperly or if withdrawal is in the best interest of both the taxpayer and the government. For example, it may be granted if a taxpayer enters a direct debit installment agreement. Removing the public notice can make it easier to obtain credit.