Resolving Federal and State Tax Liens Against Real Property

A tax lien or warrant may affect your ability to purchase or sell property. In general, a lien is a financial claim against real estate that provides security for a debt or obligation of the property owner. A lien can be either voluntary or involuntary. A real estate tax lien, for example, is an involuntary lien. 

When purchasing real estate, a lien will prevent you from securing clear title to the property, which, in turn, may affect your ability to obtain financing. A title search will usually indicate whether or not a lien exists and whether the seller is the legally recognized property owner. You can conduct your own search at the clerk's office in the county where the property exists; however, for a more comprehensive search, you may consider hiring an attorney and an abstract company to conduct the title search for you.

Federal Tax Lien

A federal tax lien gives the IRS a legal claim to all of the taxpayer's property for the amount of the tax liability. A lien arises when a tax liability has been assessed, a demand for payment is made, and the taxpayer does not pay it. A Notice of Federal Tax Lien is filed with the local recording office (e.g., county clerk's office) that identifies tax liabilities owed by the taxpayer.

Generally, the IRS can pursue collection of a tax liability up to 10 years from the date it was assessed. The IRS may maintain the effectiveness of the liability by refiling the notice of lien with a Notice of Federal Tax Lien Refile. Subsequent refile deadlines, if applicable, are 10 years after the expiration of the previous refile period. A lien usually releases automatically 10 years after a tax is assessed if the statutory period for collection has not been extended and the IRS does not extend the effect of the Notice of Federal Tax Lien by refiling it.

After satisfying the lien, the IRS issues a Certificate of Release of the Federal Tax Lien. The taxpayer will also be responsible for all fees charged by local recording offices associated with filing and releasing the lien.  

New York State Tax Warrants and Liens

Similarly, at the state level, a tax warrant creates a lien against your real and personal property. When a tax warrant is issued, the following occurs: (1) the warrant is filed with your local county clerk's office and the NYS Department of State, (2) the warrant becomes a part of the public record stating you owe taxes; (3) collection of the tax may be achieved through a levy, income execution, or seizure and sale of property; and (4) the action may show up on your credit report making it difficult to obtain loan or buy and sell property (warrants are not reported to credit reporting agencies). 

If you are buying or selling property subject to a federal or state tax lien and need assistance removing the lien, please call our office for assistance.