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If a property owner fails to pay federal taxes, the IRS files a Notice of Federal Tax Lien with the state recorder's office to secure the debt and alert creditors that the government has a legal right to the property. You can find a federal tax lien at the recorder's office in the appropriate county and state.
Uncle Sam wants to get paid just like every other creditor. The IRS just happens to have more ways of securing its debts than the average creditor.
If a person fails to pay her federal taxes, the IRS assesses her liability and sends a bill explaining the debt. If she doesn't pay it by the deadline, the IRS prepares and records a federal tax lien giving it an interest in any real or personal property the taxpayer owns or acquires while the lien is in effect.
A federal tax lien represents the government’s claim against a delinquent taxpayer's property. The lien protects the IRS's interests since the taxpayer cannot sell her property without paying off her tax debt.
Both tax liens and tax levies are means the IRS has at its disposal to protect and collect past-due taxes. But they are different actions.
You can think of a tax lien as defensive enforcement action, while a tax levy is an active action. A tax lien is a public document that tells a taxpayer and the world that the taxpayer owes back taxes to the government. It puts the IRS debt in line (usually near the front of the line) to collect from the taxpayer's assets.
A tax levy occurs when the IRS actually takes property to put toward a tax debt. For example, if a taxpayer owes $10,000 in taxes and has $10,000 in a savings account, the IRS can put a levy on the funds and apply them to the debt. The IRS has the right to seize or levy on funds, securities, personal assets and real property.
Federal tax liens are public records. This means that anyone can do a federal tax lien lookup and find outstanding liens, either against themselves or a third party.
Tax liens must be officially recorded in order to provide public notice of the government's claim on a taxpayer's property. The liens are recorded with a state recorder's office. This office may take different names in different states, but it will likely be the same place you record a property deed. This state office often provides an online index of lien documents.
For example, in California, federal tax liens are filed with the County Clerk Recorder. The Sacramento County office offers an online index of documents recorded in that county so that you can verify the existence of a lien. You need a taxpayer's name and the year of the lien recording to run the search.
You'll also find various companies offering tax lien searches online. They usually charge fees for this service.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.