IRS Liens Law & Legal Definition

IRS liens are encumbrances against all property and rights to property of the taxpayer, something akin to a bank's mortgage on a house or a lien on a car, except that it encumbers everything owned by the taxpayer. It is non-consensual. That is, while a person may grant a bank a mortgage on a house in order to get a loan to buy it, or a lien on a car, the federal tax lien arises without regard to the taxpayer's permission or consent.

Rights to sell real property subject to am IRS lien vary according to the type of ownership and state laws. For example, real property held as tenancy by the entirety may or may not be sold by the IRS for the tax liability of just one of the tenants, depending on the laws of the state.

If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. Certain conditions and limitations apply. Refer to Publication 783 (PDF), Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien.

The general federal tax lien is authorized by IRC §6321, which states the following:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

Generally, in order for the lien to arise, three things are required: the assessment of the tax liability, the demand for its payment, and the refusal or neglect to pay it.