What is a "federal tax lien"?

A federal tax lien is specifically a claim against an individual's property that arises when that individual has failed to pay federal taxes owed to the government. When the Internal Revenue Service (IRS) determines that a taxpayer has unpaid federal taxes, they can file a lien, which serves to secure the government's interest in the property. This claim can affect the individual's ability to sell or refinance the property, as the lien represents a legal right that gives the IRS priority over other creditors in the event of a sale.

The presence of a federal tax lien signifies that the government has the right to collect from the proceeds of any property sold that is subject to the lien. This is crucial for protecting the federal government's interest in collecting taxes due. Understanding federal tax liens is important for anyone involved in real estate transactions, as these liens must be addressed and resolved before a clear title can be conveyed to new buyers.