Federal tax liens are a product of the Internal Revenue Service (IRS). Federal tax liens are created and filed in the property records by the IRS when a taxpayer owes the IRS money that the taxpayer hasn’t paid. If you have ever had a federal tax lien against your property, you may wonder if the IRS can foreclose on your property. By understanding how a federal tax lien works, it can equip you to avoid foreclosure or know how to handle it. However, in full disclosure, dealing with a federal tax lien can get messy quickly, which is why the majority of individuals or companies facing this situation turn to successful attorneys for guidance and representation.

Suffice it to say, you do not want a federal tax lien against you. It is the first thing that hits the public record, so creditors and credit reporting agencies will know there is a federal tax lien. A federal tax lien is filed in the county in which the debtor has property and theoretically puts a lien on all the property, real or otherwise, the debtor has in that county. For these reasons and so many more, federal tax liens should always be taken seriously.

Although federal liens are attached to everything a taxpayer owns within that county, there may be some wiggle room. A homeowner with a lien may still be able to sell furniture, such as a couch, to their neighbor without interference from the IRS. However, if a factory with a lien is selling expensive equipment worth millions of dollars, the IRS could come after that equipment and leave the buyer empty handed.


What Happens When a Federal Lien Is Issued on Property with an Existing Mortgage?
In the event that the IRS has a federal tax lien against a house with an outstanding mortgage, the question becomes which is superior? The tax lien or the mortgage? In general, most states have a first come, first serve rule which means that if the mortgage is in existence prior to filing the tax lien (i.e. the deed of trust in favor of the mortgage lender is filed in the public record before the federal tax lien), the mortgage will most likely be superior.

However, it would be a mistake to think that the IRS cannot do anything if there is a current mortgage on the house. For example, if there is a house with an existing mortgage and a federal tax lien is filed, the IRS can still foreclose. A foreclosure requires the IRS to go through some procedural hurdles first, which typically makes this process uncommon, but it can happen.
The Steps the Government Takes to Follow Through with a Foreclosure
For the government to foreclose on a property, there is a procedure they must follow which can generally look like the following:

* The government gives notice by sending intent letters to the taxpayer
* If the taxpayer does not provide a satisfactory answer or any answer at all, then the IRS will do a public notification. This is most often done with commercial property and office buildings, but it may also be done with a house.
* The IRS will prepare to sell their interest in your house, which means they will foreclose on the property if you do nothing to stop them.
* Foreclosure means the IRS will conduct the sale of the property and issue a special kind of deed.

In most cases, the IRS applies the eighty percent rule, which means they are looking to get eighty percent of the value of the house. So, if you have a $300,000 house, $240,000 mortgage and a $60,000 tax lien on it, there is not enough equity.
Right of Redemption
The taxpayer has a right of redemption which can be a specific number of months for the taxpayer to come up with the funds to pay the amount the property sold for, plus a redemption premium, which can be somewhere around twenty percent.

For instance, if a buyer at a foreclosure auction bids $100,000 for the property,