Why Did I Receive a Notice of Federal Tax Lien?

If you have received a Notice of Federal Tax Lien from the Internal Revenue Service (IRS), it signifies that the agency has made a legal claim against your property because of unpaid taxes. This document, often Form 668(Y), is a public notice filed with local authorities to inform other creditors of the government’s interest in your assets. Understanding this notice is the first step toward resolving the underlying issue.

The Meaning of a Federal Tax Lien

A federal tax lien is the government’s legal claim against all your current and future property, which serves as security for a tax debt. This includes real estate, vehicles, and financial assets. The lien arises automatically after the IRS completes three specific steps. First, the IRS must assess your tax liability. Second, it must send you a “Notice and Demand for Payment,” a bill explaining the amount owed and requesting payment.

After sending the demand, if you neglect or refuse to pay the debt, the lien is established. The IRS then files a public document, the Notice of Federal Tax Lien, to alert other creditors that it has a claim against your property. This public filing can affect your ability to obtain credit, as it establishes the government’s priority over many other creditors. A lien secures the government’s interest in your property, whereas a levy is the actual seizure of property to satisfy the tax debt. The notice you received is about the claim, not the immediate seizure of assets.

Decoding the Information on Form 668(Y)

The Notice of Federal Tax Lien, Form 668(Y), contains specific details about the government’s claim. The form will display your name, address, and taxpayer identification number, which you should verify for accuracy. It will also list the specific tax periods for which you owe money, identified by the form number (e.g., 1040 for individual income tax) and the year.

The form details the type of tax owed, the date the tax was assessed, and the unpaid balance of the assessment. This balance is the amount you owed as of the date the lien was filed. This amount will continue to grow as interest and penalties accrue on the unpaid balance until the debt is fully satisfied. The notice will also include a “Last Day for Refiling,” which indicates the expiration of the ten-year statute of limitations on collection.

Immediate Steps to Address the Notice

Upon receiving a Notice of Federal Tax Lien, the first step is to verify that the debt detailed on the notice is accurate. Review your tax records and any previous correspondence from the IRS to confirm the liability. If you believe there is an error, you have the right to dispute the lien. The notice itself will provide information on your right to request a Collection Due Process (CDP) hearing with the IRS Office of Appeals, which must be requested within 30 days.

If the debt is legitimate, contact the IRS to discuss your options. The notice includes a contact phone number for the Centralized Lien Operation. The most direct way to resolve the lien is to pay the debt in full. Once the IRS receives full payment, it must release the lien within 30 days by filing a Certificate of Release of Federal Tax Lien.

If you cannot pay the full amount immediately, you should inquire about setting up a payment plan, known as an Installment Agreement. If a lien is already in place, converting to a Direct Debit Installment Agreement may allow you to request its withdrawal while you make payments.