Federal tax liens can have a severe impact on your financial stability. When you fail to pay your tax, the IRS imposes a lien on all your asset—including real estate—giving them the legal authority to collect tax from the proceeds of your asset. This can affect you, your spouse, or your company, potentially leading to the seizure of your account receivable.

Once a lien is in place, everything you own is at risk of being claimed by the U.S. Government. Additionally, this lien appears on your credit report and can hinder your ability to open a checking account or secure a loan against your asset. As a result, a bank may be reluctant to deal with you to avoid complications with the IRS.

Obtaining reasonable loan term becomes nearly impossible with a federal tax lien on your record. For instance, you might end up paying 18–22% interest on a car loan. It also prevents you from buying or selling any real estate, among other financial restriction.