What is a "federal tax lien"?

A federal tax lien is a legal claim against a taxpayer's property by the Internal Revenue Service (IRS) due to the taxpayer's failure to pay federal income tax. When an individual or business owes back taxes to the federal government, the IRS can file a lien that provides a public notice of their claim against the property to secure the government’s interest in the amount owed. This means that any real estate, personal property, and financial assets of the taxpayer could potentially be affected, making it difficult for the taxpayer to sell or refinance their property without addressing the tax obligation first.

Understanding this concept is essential because it highlights the federal government's authority to protect its interests when taxes are unpaid, impacting the taxpayer’s ability to manage their property freely. In contrast, claims related to state taxes or court decisions regarding property disputes do not accurately capture the essence of a federal tax lien.