Tax Lien: Meaning in a Merchant Cash Advance
A tax lien is a government claim against a business's property for unpaid taxes. Federal tax liens are filed by the IRS, and states and counties file their own for sales, payroll or property taxes.
What does tax lien mean?
When a business falls behind on taxes and doesn't resolve the balance, the taxing authority files a public notice of lien. It attaches to the business's property, including receivables and bank accounts. Unlike a funder's UCC filing, a tax lien doesn't come from a contract you signed. It comes from the tax law, and it follows its own rules on priority.
Why does tax lien matter to your business?
Tax liens are one of the first things funders look for. Many won't write an advance while an unresolved tax lien is on file, because the government's claim can compete with theirs for the same receivables. Others will fund if there is a signed payment plan that is current, often asking for proof of the last few payments. Payroll tax liens get the closest look.
What should you do before you shop for funding?
- Find out exactly which liens are on file and the current balance of each.
- Get any payment plan in writing and keep it current.
- Keep proof of the plan and recent payments ready to send.
Where can you learn more?
The IRS explains federal tax liens and how to get one released on its site at irs.gov. For state and local liens, the revenue agency that filed it has the release process.
Where will you see it?
In a lien or judgment search on the business or the owner. In letters from the IRS or the state revenue agency. In a funder's stipulations, which ask for a payment plan or release.
Which terms are related to tax lien?
The full list is in the glossary. Owners ask about this in How do I find UCC filings on my business?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.