A tax lien is a claim made by a government entity against the assets of a taxpayer. The lien is imposed when the taxpayer has not paid taxes in the full amount. A tax lien can be triggered by the nonpayment of a variety of taxes, such as:
- Federal income taxes
- Local property taxes
- State income taxes
To clear a tax lien, the taxpayer must either pay the amount in full or negotiate some lesser amount with the government that initiated the lien. If the taxpayer continues to avoid payment, the government can seize the taxpayer's assets in order to obtain payment of the amount due.
A tax lien can be a major impediment for a taxpayer, since it is impossible to sell an asset that has a tax lien attached to it. In addition, tax liens are included in credit reports, so it is much more difficult for a person to obtain credit when there is a tax lien outstanding.