Nicholas Frey

When a taxpayer falls behind on their federal tax obligations, one of the most powerful collection tools the Internal Revenue Service (“IRS”) may use is the federal tax lien. Understanding how and why a lien arises—and how it affects your rights and assets—is critical in evaluating resolution strategies.
A federal tax lien is the government’s legal claim against all of a taxpayer’s property, both current and future, when a tax debt remains unpaid.

Under Internal Revenue Code Section 6321, a lien arises automatically when three conditions are met:

The IRS assesses the tax liability;

The IRS issues a notice and demand for payment; and

The taxpayer fails to pay the amount due.

At that point, the lien attaches to:

Real property (homes, land)

Personal property (vehicles, equipment)

Financial assets (bank accounts, receivables)

Future-acquired property

This is often referred to as a “secret lien” because it exists by operation of law—even before any public filing.

While the lien exists automatically, the IRS may choose to file a Notice of Federal Tax Lien (NFTL) to protect its interest against third parties.

The NFTL is filed in local recording offices and:

Alerts creditors that the IRS has a legal claim

Establishes the IRS’s priority position over other creditors

Can significantly impact creditworthiness and financing

The authority to file an NFTL comes from Internal Revenue Code Section 6323.

The IRS files a lien primarily to secure its interest in collecting unpaid taxes. Common reasons include:

1. Protection of Government Interest

If a taxpayer owns valuable assets or may acquire assets, the IRS files a lien to ensure it gets paid before other creditors.

2. Risk of Nonpayment

Where there is doubt about voluntary compliance or the ability to pay, a lien preserves the IRS’s claim.

3. Large or Long-Standing Liabilities

Higher balances and unresolved debts increase the likelihood of lien filing.

4. Collection Strategy Escalation

A lien is often a precursor—or parallel—to enforced collection actions such as levies under Internal Revenue Code Section 6331.

What a Tax Lien Means for the Taxpayer

A federal tax lien has broad and serious consequences:

Encumbrance on Property

You cannot freely sell or refinance assets without addressing the IRS’s claim.

Credit Impact

The NFTL can appear in public records and affect borrowing ability.

Priority Over Creditors

The IRS may take priority over other creditors, depending on timing and filing.

Attachment to Future Assets

Even property acquired after the lien arises becomes subject to it.

A common misconception is that entering into an installment agreement prevents or removes a lien. That is not necessarily the case.

Even when a taxpayer enters into an installment agreement under Internal Revenue Code Section 6159, the IRS may still file a Notice of Federal Tax Lien.
Because an installment agreement does not eliminate the liability, the IRS often files a lien to protect its interest while payments are being made

It is important to distinguish between a lien and a levy:

A lien is a legal claim against property

A levy is the actual seizure of property

A lien does not mean the IRS has taken your property—but it gives the IRS the legal right to do so if necessary.

Navigating an IRS tax lien requires more than simply entering into a payment plan—it requires a strategic approach grounded in tax law, IRS procedure, and practical negotiation.

Frey Law Firm assists taxpayers by:

Proactively Preventing Lien Filings

In many cases, lien filing can be avoided with proper timing and structuring of a resolution strategy. This includes:

Structuring installment agreements to minimize lien risk

Engaging the IRS early before enforcement escalates

Demonstrating factors that weigh against filing

Negotiating Installment Agreements the Right Way

Not all installment agreements are equal. The firm evaluates:

Whether a streamlined or direct debit agreement can avoid a lien

Payment terms that align with the taxpayer’s financial reality

Long-term implications, including the Collection Statute Expiration Date (CSED)

Lien Withdrawal, Subordination, and Discharge

If a lien has already been filed, options may still be available:

Lien Withdrawal to remove the public record impact

Lien Subordination to allow refinancing or borrowing

Lien Discharge to facilitate the sale of property

Each option requires precise legal positioning under the Internal Revenue Code and supporting documentation.

Protecting Assets and Equity

The firm evaluates exposure across:

Real estate holdings

Business interests

Bank accounts and receivables

and develops strategies to preserve equity while resolving the liability.

Handling IRS Communications and Enforcement

With a properly executed power of attorney, Frey Law Firm communicates directly with the IRS to:

Stop or limit enforcement actions

Ensure compliance with IRS procedural requirements

Advocate for the taxpayer in negotiations and appeals

A federal tax lien is one of the IRS’s most powerful tools to secure unpaid tax liabilities. It arises automatically when taxes go unpaid and may be publicly filed to protect the government’s interest. Importantly, entering into an installment agreement does not prevent a lien—in many cases, it accompanies the agreement.

However, with the right legal strategy, taxpayers can often avoid, minimize, or remove the impact of a lien. Working with experienced tax counsel can make a significant difference in both the outcome and the long-term financial impact.