What Happens After the IRS Files a Notice of Federal Tax Lien on Your Business
By Sarah Mitchell, CPA | Reviewed by: James Okafor, EA
What a Notice of Federal Tax Lien Does to Your Business
An NFTL is a public legal document the IRS files with the county courthouse or UCC filing office. Once filed, it blocks all conventional business financing. The IRS holds first priority over every asset – which means no bank, SBA lender, equipment financier, or merchant cash advance provider will touch your application. The NFTL also affects government contracts, professional licenses, and surety bonds. It destroys business credit across Dun and Bradstreet, Experian Business, and Equifax Business.
The Sequence From Unpaid Tax to NFTL
The IRS assesses the tax and sends a demand for payment (CP14). If unpaid within 10 days, the federal tax lien automatically attaches to all assets by operation of law – no court action required. The IRS then files the NFTL publicly and notifies you within 5 business days. From that point, you have 30 days to request a Collection Due Process (CDP) hearing with the IRS Office of Appeals.
How the NFTL Is Released
The IRS must release the NFTL within 30 days of the date the underlying liability is fully paid. Options include: out-of-pocket payment to the IRS, tax lien subordination financing where a specialty lender pays the IRS in full using an IRC 6325(d) subordination certificate and the business repays the lender over 12-60 months, or an accepted Offer in Compromise with full payment.
Frequently Asked Questions
Can I sell my business with an NFTL?
Yes, but the IRS lien attaches to the sale proceeds. The IRS must be paid from the proceeds at closing. A tax attorney should be involved in any business sale where an NFTL is on record.
Does the NFTL affect personal credit?
Federal tax liens were removed from personal credit reports by the major credit bureaus in 2018. However, NFTLs appear on business credit reports and remain searchable in public records.
Apply for Tax Lien Financing – No Upfront Fees
Tax Funds is a financing marketplace. IRS procedures sourced from IRS.gov.