Tax Help and FAQs

Have you received a Notice of Federal Tax Lien (NFTL)? 

What is the NFTL? 

The NFTL is used to provide the United States with a legal claim against a taxpayer's real and personal property if the IRS has assessed that individual with any tax liability.  Before a NFTL can be issued, the IRS must assess the liability against the taxpayer and send a Notice and Demand for Payment (a "bill" that indicates how much the taxpayer owes in taxes). Additionally, the taxpayer must "neglect or refuse to pay" fully the debt.

What Can I Do to Avoid Receiving a NFTL? 

Short of paying your tax debt in full, there is not much that can be done to stop the IRS from issuing a NFTL.  However, it is important to know the effects this notice has on taxpayers.  The filing of a Federal tax lien causes an immediate decrease of a taxpayer's credit score of 100 points.  Credit bureaus defend this practice noting that the mere fact the lien has been filed is an indicator of "bad character."  Where a taxpayer pays his tax in full and the IRS releases the lien, credit bureaus keep the lien on the taxpayer's credit report for seven years.  Where the lien expires as a result of age, credit bureaus keep the lien on the taxpayer's credit report anywhere from ten to an indefinite amount of years.  Additionally, there is anecdotal evidence that this practice causes taxpayers significant hardship in attempting to gain employment.

What Can I Do Once I Have Paid My Debt in Full?

Once a debt is paid in full, one of two things happens to the lien:  it is either released or withdrawn.  Unlike a release, a withdrawal of a Federal tax lien generates a notice to credit reporting bureaus; the bureaus will then delete any reference to the tax lien in the taxpayer's credit history, thus restoring their credit score to its pre-lien status.  Because it will be necessary for taxpayers seeking a withdrawal to work with the National Taxpayer Advocate Service, you should contact a Low Income Taxpayer Clinic in your area.  They will be able to explain more fully the withdrawal process.