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What is a tax lien?

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    As Benjamin Franklin once said, "...nothing is certain except death and taxes" (and waiting long lines at the department of motor vehicles). That's right, while far from enjoyable, paying taxes is an essential duty that we all accept in order to fund our government and its many important services.

    Taxes can be automatically deducted from your paycheck (income taxes), paid towards the state your house is in (property taxes), are often included in purchases (depending on the state) and are expected to be paid each year.

    What happens if you fail to pay or file them? Whether you're a homeowner who hasn't paid property taxes or a freelancer without a standard W2 form, if you don't pay your taxes, you may run into some consequences—including the possibility of tax liens.

    A tax lien is a government claim against your property (and future properties or assets) that is initiated when you fail to pay taxes. If you receive a tax lien, it's possible that you've already been audited by the IRS. Before a tax lien is filed, the government may first try to send you a notice or a letter asking you to make payments towards what you owe. If you take action, you may be able to avoid a tax lien. If you do not, you could face additional consequences.

    In this article, you will learn:

    • How tax liens affect credit scores
    • How to know if you receive a tax lien
    • Types of liens that can affect credit
    • Steps to take to avoid receiving a tax lien

    How does a tax lien affect my credit score?

    Credit bureaus—including Experian™, Equifax® and TransUnion®—stopped listing tax liens on credit reports as a derogatory remark starting in 2018. While tax liens are no longer appearing on credit reports at this time, it's worth remembering that the information that credit bureaus include is always subject to change.

    Because tax liens are currently not included on your credit report, they don't hurt your credit score directly. However, having a tax lien can affect you financially in other ways. Let's explore these below.


    Tax liens are attached to your assets. This goes for any properties you might have, automobiles or securities. Additionally, they will be attached to any assets you may obtain in the future. According to the IRS, during the duration that you have a tax lien, it may be difficult for you to sell your assets and make additional money off of them. For example, if you have a tax lien filed against your house, you won't be able to receive profits from selling it until you pay off the debt you owe.


    Bank accounts are also considered assets that can be susceptible to tax liens. If you have a government claim attached to your bank accounts, it may be difficult to receive additional credit. Once the IRS files the notice of a tax lien, you may struggle to gain access to higher credit limits or open new credit cards until you pay the amount you owe to the government.


    Tax liens are attached to business properties, too. That means if you're a business owner with outstanding invoices owed to you (otherwise known as accounts receivable), these assets may be at risk of having a tax lien filed against them. This may delay this may delay the receipt of future funds—you won't be able to receive them until you pay the taxes you owe.


    Even if you've filed for bankruptcy, your debts are still expected to be paid. That means that any taxes you've failed to pay and tax liens filed against you may continue on after filing for bankruptcy. Note—this is not the case if you declare bankruptcy.

    How do I find out if I have a tax lien?

    You'll know if you're on the way to receiving a tax lien if you receive a notice (or demand for payment) from the IRS about the debts you owe. If you fail to pay these debts, you may have a tax lien filed against you. You will be made aware of this because you will receive a Notice of Federal Tax Lien in the mail. Tax liens will also become public record because they are filed at the courthouse.

    What kind of other liens affect my credit?

    Tax liens are just one kind of lien under an umbrella of statutory liens. These are all claims that the government can make on a state or federal level. Other statutory tax liens that could affect your credit include but not limited to:

    • Mechanic's liens—while this sounds like it has to do with your car, it's actually about failing to pay for work done on your property
    • Landlord liens—this is a result of failing to pay rent to your landlord or property manager
    • Condominium association/homeowners association liens—for properties that belong to these associations rather than a standalone home

    Steps to take to avoid a tax lien

    Now that you know how tax liens can affect your credit (and ability to gain access to more credit), you may be wondering how you can avoid getting a tax lien attached to your assets. According to Experian, some measures you can take to avoid a tax lien include:

    • Improve your payment history, which accounts for a large part of your credit score and involves making your payments on time on a regular basis
    • Keeping balances and credit utilization low—doing so means you're taking measures to adjust your budget to help balance any offsets and costs, as well as making sure you have enough funds to pay your taxes in full and on time
    • Settling your debt—you can do this by seeking advice from a credit counselor who can help give you tips on how to manage and settle your debts
    • Enroll in Chase Credit Journey® to get access to free resources and credit monitoring tools so that you can protect your credit score

    Taking these steps can be a helpful way to avoid potentially impacting your credit score and having to go through the process of rebuilding your credit.

    Be proactive and pay your taxes when they're due

    Tax liens are a sign that you've missed payments to the government and may need to take a closer look at how you organize your personal finances. Taxes are complicated but necessary—paying them will help keep you out of financial trouble and potentially hurting your credit score. The more knowledge you have about how to address your taxes and pay them on time and in full, the less of a chance you have of falling into arrears and facing the possibility of a tax lien.

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