IRS tax liens are on the rise. How they affect your finances

The number of tax liens filed by the Internal Revenue Service has increased in recent years, exposing more people who owe federal tax debt to potential job loss, inability to secure loans, and other downstream financial consequences.

The IRS filed more than 214,000 federal tax lien notices in fiscal year 2025, which ended Sept. 30, according to agency data released in June. This is a 9% increase compared to the previous year, and a 36% increase compared to 2022.

Tax experts and IRS officials say the upward trend is largely due to the resumption of more regular collections following a pause in enforcement activity due to the COVID-19 pandemic.

But this comes at a time when households are struggling with affordability issues after years of above-target inflation, and amid deep cuts to the IRS workforce overseen by the Trump administration, leading some observers to wonder whether the IRS will rely more heavily on automated lien filings to make up for the cuts.

Taxpayer advocates also said they are concerned about the increase in general, given the potential negative impact of liens on household finances.

“This is just the kiss of death for a lot of things,” said Nina Olson, executive director of the Taxpayer Rights Center and a former IRS tax advocate.

A tax lien is a legal claim by the government against a taxpayer’s property, such as real estate or financial assets, if the taxpayer fails to pay taxes.

This is one of the IRS’s enforcement mechanisms, including “setting off” tax refunds and garnishing an individual’s paycheck.

Olson said lien applications are public and notify potential lenders that the IRS has priority rights to a taxpayer’s debt. That could make it harder for taxpayers to get new credit, such as mortgages or home refinances, for example, or for entrepreneurs to get revolving lines of credit, Olson said.

“All finance stops,” Olson said. “What financier would say, ‘We’ll fall in line after the IRS?'”

Experts say that not only can the IRS pursue claims against taxpayers’ assets, including business assets, but employers can also turn over job applicants if a lien is found during a background check.

Keith Fogg, who founded the Tax Litigation Clinic at Harvard University and spent more than 30 years in the Internal Revenue Service’s Office of the Chief Counsel, said workers in certain industries, such as government agencies, people with certain security clearances, and financial institutions, can be fired because of liens.

“Liens have a strong meaning to some people,” Fogg said. “It has side effects.”

Experts say some households may be in arrears on taxes due to willful negligence, while others may have innocent reasons resulting in large outstanding balances and may not have the funds to pay them back.

For example, a low-income family may claim the Child Tax Credit or Earned Income Tax Credit, but end up having to pay back thousands of dollars if the IRS later deems them ineligible for the tax break, such as if the children lived with their parents for five months of the year instead of six-and-a-half, Fogg said.

Additionally, freelancers and contractors can end up paying more in taxes come tax season because they don’t have an employer to withhold income taxes on their behalf, a trend Fogg said is becoming more prevalent in the growth of the “gig” economy.

Of course, the total number of annual federal lien filings by the IRS in fiscal year 2025 remains about half of the typical 400,000 to 500,000 filed in pre-pandemic years, according to agency data.

“After a significant decline in collection activity during and after the pandemic, Internal Revenue Service enforcement continues to return to pre-COVID-19 levels,” according to an emailed statement from an IRS spokesperson.

But even as these lien filings increase, the IRS’s staffing numbers have decreased significantly, including cuts by the so-called Department of Government Efficiency (DOGE).

Tax advocacy group Erin Collins said in a report to Congress last month that the agency will have 74,000 employees at the start of the 2026 tax filing season, down 27% from 102,000 employees the year before.

Trump administration officials have previously indicated a goal of reducing the IRS workforce to about 50,000 people, a staffing level not seen since the 1960s, the Yale Institute for Budget Studies said in an April report.

Olson said he is concerned that the cuts could lead to the IRS becoming more reliant on automated lien filings if the agency does not have enough employees to discretionarily scrutinize a particular taxpayer’s situation.

“As lien filings increase in the aftermath of COVID-19, there are fewer employees working on collections and fewer experienced executives and supervisors to review them and make discretionary decisions,” Olson said.

Back in 1980, IRS revenue officers made “individual” and “thoughtful” decisions on all lien applications, Fogg said.

Currently, the IRS typically automatically files such liens when an individual’s tax liability exceeds $10,000, Olson said. If the amount is low, administrator approval is usually required to file a lien. The threshold for filing an automatic lien was previously as low as $5,000, but was increased in 2011.

Olson said that while he served as a national tax attorney from 2001 to 2019, he discovered that automatic lien filings can impair a taxpayer’s ability to pay their current tax debt, increase their risk of incurring additional tax debt, and reduce their earning capacity.

The IRS did not directly respond to questions about whether it would further automate lien filings.

“Automated enforcement activity is a carefully managed process that helps ensure the IRS has sufficient resources to respond to taxpayer inquiries, process appeals, and provide appropriate customer service,” an IRS spokesperson said in an email.

The agency says that before filing a federal tax lien notice, it sends “multiple notices” informing taxpayers of their unpaid balance, options available for resolution, and collection due process rights.

“Taxpayer rights remain a central consideration throughout the collection process,” the spokesperson said.

Fogg said he believes it is unlikely that the IRS will lower the threshold for filing an automatic lien.

Part of the calculation is the rate of return, which could ultimately prove costly and administratively burdensome for the IRS in certain cases, such as when a taxpayer pushes back against a lien and seeks forgiveness, Fogg said.

“Just because you file a lien doesn’t mean you’re going to get money,” he says.