What's This Notice of Federal Tax Lien I just got in the mail?

If you're behind in paying your taxes, you may soon be receiving a Notice of Federal Tax Lien. The Federal Tax Lien is just one of many collection tools in the IRS bag of tricks, but it remains one of the most devastating.

Unlike a levy, a lien doesn't give the IRS the right to take title to a particular property you might own (for example, a house or car). Instead, a lien is like a floating YOU OWE US note the IRS sends to all of your creditors and the major credit reporting agencies. Try to sell assets of any value, and the IRS is first in line to take the money you would otherwise receive. The end result? Your tax debt becomes a matter of public record and your credit is harmed. Typically, the IRS will not release a lien until 30 days after the tax debt is paid in full.

In most cases, the IRS will send a notice of a federal tax lien before perfecting their interest against your property. Usually the IRS will send a notice of a federal tax lien after they have issued a demand letter for payment. If the letter is ignored or you fail to make adequate payment arrangements, the IRS can issue a notice of federal tax lien letter, which advises you that a lien has been imposed against you. But take note -- even if you don't get the notice in the mail, the IRS may already claim a lien against you. The so-called "silent lien" lets the IRS make a claim against any individual who owes them without notice.

If you receive a Notice of Federal Tax Lien, you need to take action soon. Consult with a professional to determine what your next step should be.