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Tax lien
Also called IRS lien, federal tax lien, state tax lien.
A statutory claim by a taxing authority over a taxpayer's property for unpaid tax, which in the federal case attaches to substantially everything the taxpayer owns or later acquires.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A federal lien arises automatically when tax is assessed, demand is made and it goes unpaid — no filing is needed for it to exist against the taxpayer. Filing a Notice of Federal Tax Lien is what makes it effective against competing creditors: other secured parties, purchasers and judgment creditors. State tax liens follow their own statutes and vary widely in scope and in how they are perfected.
Priority against a secured lender is governed by its own rules rather than by the ordinary first-to-file test. Broadly, a secured party who perfected before the notice was filed keeps priority in the collateral it then had, but the protection for collateral acquired after the notice is limited — commonly to a short window measured in days after the filing. For a lender relying on a revolving pool of receivables and inventory, that is the whole exposure.
In underwriting, a filed tax lien is a common decline trigger and, where it does not decline the file, changes the structure: some funders will proceed if there is a formal instalment agreement in place with a documented payment history, some require the lien to be paid from proceeds, some require subordination from the taxing authority.
Where this one catches people
Owners believe an instalment agreement removes the lien. It generally suspends enforcement, not the lien itself, and the notice stays on the public record where every UCC and lien search will find it. Separately, the recurring surprise for lenders is the after-acquired property rule: an all-assets filing perfected years earlier does not automatically outrank a later-filed tax lien as to receivables generated after the notice.
Where you will meet this term
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Tax lien — common questions
What does tax lien mean?
A statutory claim by a taxing authority over a taxpayer's property for unpaid tax, which in the federal case attaches to substantially everything the taxpayer owns or later acquires.
Where does tax lien catch people out?
Owners believe an instalment agreement removes the lien. It generally suspends enforcement, not the lien itself, and the notice stays on the public record where every UCC and lien search will find it. Separately, the recurring surprise for lenders is the after-acquired property rule: an all-assets filing perfected years earlier does not automatically outrank a later-filed tax lien as to receivables generated after the notice.
Is tax lien the same as an interest rate?
Tax lien is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does tax lien apply to?
Merchant Cash Advance, Term Loan, Business Line of Credit, SBA Loan, Invoice Financing.
Is there a worked example of tax lien?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside tax lien?
After-acquired property, Senior lien, Subordination, UCC search, Underwriting.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.