A common misconception is that a Federal Tax Lien is on your house. Taxpayers often call our office and state that “the IRS has filed a lien on their house.” This is partially true, but is under inclusive. The lien is not only on your house, but it’s on all real property that you have an interest in (current or future interest), as well as all other property that you have an interest in. This can include but is not limited to: bank accounts, investment accounts, retirement accounts, automobiles, equipment, ownership of business entities, personal belongings, etc. Thus said, the Federal Tax Lien is on everything that you currently own, or have a future interest in.
If you were to sell any of those properties, the proceeds are supposed to flow to the IRS in order to pass the property with clear title. However, lien searches are rarely done with the exception of real property transfers, so the few occasions that the IRS can take the money in a sale or transfer proceeding, are when a taxpayer sells a piece of real property.
If you have a Federal Tax Lien filed against you and you are thinking of selling or transferring property of any kind you must be weary that the IRS could step in and take the proceeds of the sale up to the amount of the Federal Tax Liens.
Purchasers of property should also be cognizant of Federal Tax Liens against the seller as you may be purchasing property without clear title. In some instances the IRS has stepped in and attempted to seize the property after conveyance.