Tax Lien – Definition

Cite this article as:"Tax Lien – Definition," in The Business Professor, updated May 5, 2019, last accessed December 4, 2020,


Tax Lien Definition

Tax Lien gives the federal government the right to claim the assets or personal properties of a taxpayer, especially a noncompliant one. In an ordinary meaning, lien refers to the right to take another’s property if an obligation is not discharged. Tax lien is a legal claim that the government has over a non-compliant taxpayer’s properties or assets.

Tax liens rarely occur as they serve as the last resort imposed by law upon the failure of a taxpayer to make payment or fulfil his obligations. Non-payment of any form of tax can make the federal government resort to tax liens.

A Little More on What is a Tax Lien

A state or federal government can place tax liens on an individual’s assets or property after non-compliance to tax payment. Tax liens can also occur at the local level. Although, tax lien is a legal claim, it does not permit the sales of asset by the government. It only stipulates that the government has the first claim over the assets among other creditors who might be eyeing the assets. Tax liens also prevent the owners of the properties (non-compliant taxpayers) from selling the properties or assets. Tax liens generally leave a bad impression on the reputation of the con-compliant taxpayer. The lien holds until the taxpayer pays off the debts or when statute of limitation takes effect.

Tax liens are publicly recorded, they reflect on the offender’s credit report and this can last up to 10 years. Once the offender pays off their debts, the tax liens will be dismissed and the public record will be updated and reflect the payment of debt.

Also, aside from an offender getting a debt dismissed in bankruptcy court, they can also decide to reach an offer in compromise with the tax authorities or government. This include agreement of favorable payment plan or payment of debts in installment. If favorable conditions are set, the impact of tax lien can be lessen. Unpaid tax or debt leaves the authorities or government no other option but to legally claim the non-compliant taxpayer’s properties.

References for Tax Lien

Academic Research on Tax Lien

Priority of the Federal Tax Lien, Young, W. F. (1967). The University of Chicago Law Review, 34(4), 723-760.

The Effect of the Federal Tax Lien Act of 1966 Upon Security Interests Created Under the Uniform Commercial Code, Coogan, P. F. (1967). Harv. L. Rev., 81, 1369.


The New Federal Tax Lien Law, Plumb Jr, W. T. (1966). Bus. Law., 22, 271.

After Drye: The Likely Attachment of the Federal Tax Lien to Tenancy-by-the-Entireties Interests, Johnson, S. R. (2000). Ind. LJ, 75, 1163.

Federal Tax Collection and Lien Problems (First Installment), Plumb Jr, W. T. (1957). Tax L. Rev., 13, 247.

The Tax Lien of the United States, Rogge, O. J. (1927). ABAJ, 13, 576.

Fog, Fairness, and the Federal Fisc: Tenancy-by-the-Entireties Interests and the Federal Tax Lien, Johnson, S. R. (1995). Mo. L. Rev., 60, 839.

Federal Tax Collection and Lien Problems (Second Installment), Plumb Jr, W. T. (1957). Tax L. Rev., 13, 459.

The Tax Lien Tamed, Shanks, H. (1961). UCLA L. Rev., 8, 339.

The Good, the Bad, and the Ugly in Post-Drye Tax Lien Analysis, Johnson, S. R. (2001). Fla. Tax Rev., 5, 415.

The Purchase Money Security Interest and Federal Tax Lien: A Proposal for Legislative Change, Fetzer, P. N. (1984). Hastings LJ, 36, 873

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