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What is a Federal Tax Lien and how do you conduct a search?

Submitted by UCS on June 22, 2021

Searching for Federal Tax Liens is just one component of a thorough due diligence search. Understanding the “What” and the “Where” of the different areas of a “Full Lien Search” involves being able to successfully sort through each jurisdiction’s recordation rules.

What is a Federal Tax Lien?
A Federal Tax Lien is defined as the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets.

If you own a corporation or LLC and it owes taxes, whether income tax, employment tax, penalties or interest, the lien only applies to property owned by the corporation or LLC. The Federal Tax Lien covers all property and “rights” to property owned by the taxpayer/debtor regardless of where the property is located or who currently possesses the property.

What happens when a Federal Tax Lien is assessed?
The Internal Revenue Service files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

A letter is then sent to the taxpayer with a copy of the “Notice of Federal Tax Lien” showing that they filed a lien with the Secretary of State and/or County Clerk’s office for any counties in which you own property. The Federal Tax Lien attaches to your property and follows it even if it is transferred and until the lien is paid off or otherwise extinguished.

Where should a Federal Tax Lien search be conducted?
Information on tax liens is public and once issued, is maintained by either the secretary of state or county tax office depending on the state. The public information that is available includes the name of the party responsible for the lien, the lien holder, and the amount due. This information is also reported to credit reporting bureaus and is only available to the person with whom the lien is against.

What information should I provide to UCS to perform a Federal Tax Lien search?
For United Corporate Services to perform a Federal Tax Lien search on a company or individual, provide the following:

• Company or individual’s name;
• State and county where business is established or state of residence for an individual; as well as
• Any additional states and counties where the company or individual is registered to conduct business or owns property.

United Corporate Services understands the complexities of performing UCC searches. For your next due diligence project, contact a Client Service Representative to discuss the best way to structure your searches and to provide you with the most comprehensive results. For more information regarding our UCC services, please visit our UCC Services page.