Originally published in December 2022 and updated in April 2026
When you’re running your business, you manage a lot of tasks at once, including your financials, marketing, inventory, customer service, and more. With so many responsibilities, staying on top of your taxes can be challenging. What happens if you miss a tax deadline? Well, you may need to deal with a tax lien before you can grow your business.
If you have a tax lien, don’t panic! In this overview, you’ll learn everything about tax liens, including what they are, how you can address them, and their impact on your business.
What is a tax lien?
If you have an unpaid tax bill with the Internal Revenue Service (IRS), a tax lien can be filed against you. Tax liens is are the IRS’s method to ensure that you pay your outstanding tax obligations to the federal government.
Liens allow the government or a lender to claim your personal or entity’s property or assets if you don’t pay your owed taxes or loans. When a tax lien is filed, it’s recorded as a public record. Even though tax liens no longer appear on your personal credit report, they still show up on your commercial and business credit reports. Both paid and unpaid tax liens will also show up in a LexisNexis search, which banks and lenders often use when deciding on your loan application.
Resolving a tax lien will take time and effort, but it’s well worth it, especially when you’re applying for a business loan.
How does a tax lien affect your business?
Having a tax lien can affect your business in many ways, including:
- Funding access: Having a tax lien against you or your business can make it difficult to get a business loan when you need one. When a lender runs a LexisNexis search on your business, an outstanding tax lien could make you ineligible for financing.
- Assets are at risk: A lien will be attached to your current assets and any future assets you own. That means the IRS can claim your property, vehicle, or securities to recover the loss. It will also attach to all your business property, including your accounts receivable.
That’s why it’s so important to stay on top of your personal and business tax filings. The best way to avoid a tax lien is to file and pay your taxes in full and on time. If you’re ever in a situation where that’s not possible, reach out to the IRS right away to find out more about your options.
It’s never too early to start tax planning, so be proactive to ensure you’re always in compliance.
How to resolve a federal tax lien
To resolve a federal tax lien, you’ll need to pay your full tax debt. Once you pay it off, the IRS will release the lien within 30 days. If you’re unable to pay the lien in full, there are a few options that may be available to you:
1. Discharge of property
You may be eligible for a discharge of property, which removes the tax lien from a specific property. While this doesn’t erase the amount you owe, it can make it easier for you to refinance the property – keeping more money in your business – and sell the property without the burden of the lien.
2. Subordination
You may also be eligible for subordination. This doesn’t remove the lien, but lets other creditors – like your lender – take priority over the IRS. This is important because it can make it easier for you to get funding when you need it. despite the lien.
3. Withdrawal
A withdrawal of the lien removes the public record of the lien, but you’ll still need to pay the debt to fully resolve it. Withdrawals can be done in a few different ways depending on your circumstances.
How to withdraw a federal tax lien
Withdrawing a federal tax lien removes it from the public record, but maintains your obligation to repay what you owe. There are two withdrawal methods that you could be eligible for if:
- Your unpaid balances are under a certain dollar amount.
- You’re in good standing with the IRS.
To qualify after your tax lien is paid off and released, you’ll need to have:
- Taken actions ahead of time to also remove it from the public record.
- Stayed in compliance with the law for the past three years filing individual, business, and information returns.
- Be current on all estimated tax payments and federal tax deposits.
If your lien is still being paid off, here’s what you’ll need to qualify:
- Owe no more than $50,000 in taxes.
- Have your Direct Debit Installment Agreement on track to pay off the entire amount owed within 72 months or before the Collection Statute expires (whichever is earlier).
- Be fully compliant with all other payment and filing requirements.
- Have at least three consecutive payments made in the direct debit payment plan.
- Have no defaults on your Direct Debit Installment agreement with the IRS.
With the withdrawal of the tax lien, you’ll ensure that other creditors aren’t competing with the IRS for your property while you work towards paying off the tax debt.
Keep your business tax-debt-free
Having a tax lien on your business can make it difficult to get the financing you need to grow and thrive. While it’s not impossible to get funding with a tax lien, it’s likely to cost you more with a higher interest rate, shorter terms, and other criteria that reduce the risk to the lender. The best approach is to always pay your tax obligations in full and on time. There’s never a bad time to start planning your tax strategy, so get in touch with your tax professional or CPA today to get started.
If you need help addressing a tax lien or are ready to get a loan, talk to Pursuit! We offer more than 15 loans and a line of credit, insightful information and resources, and business advisory services for small businesses in New York, New Jersey, Connecticut, Pennsylvania, Illinois, and Delaware.
Take a look, then contact us today to learn more about the ways we can help.