HVAC Company Facing an IRS Lien While Refinancing Equipment
Educational Example — Results Vary. This is a composite, illustrative scenario for educational purposes only. It is not a real client, not a testimonial, and not a promise of any outcome. Every tax situation is different; consult a qualified professional about your own circumstances.
Situation
A Miami-Dade HVAC contractor carried about $54,000 in income tax debt from two strong years when estimated payments were skipped. The IRS filed a Notice of Federal Tax Lien. When the company tried to refinance its service trucks and rooftop-unit inventory to free up cash, the lender pulled a title search, saw the federal lien, and declined — the IRS would stand ahead of it if the company defaulted.
The IRS Problem
The filed lien did not seize anything, but as a public claim it attached to the company's equipment and receivables and gave the IRS first priority. No lender wanted to finance assets behind the federal government. The contractor was caught in a loop: it needed the refinance to generate the cash flow to pay the IRS, but the lien was blocking the refinance.
Risks if Ignored
- Continued inability to access financing or lines of credit while the lien stands.
- Escalation from a passive lien to active levies on accounts or receivables.
- Damage to vendor and bonding relationships that run lien searches.
- Interest and penalties continuing to accrue on the unpaid balance.
Based on: A filed Notice of Federal Tax Lien standing ahead of new financing
A lien is a public legal claim, not a seizure. It does not take property, but it attaches to assets and can block financing because the IRS sits ahead of new lenders in priority.
- Bank levy authority now exists.
- A lien may hit your credit.
- Your Offer in Compromise window is narrowing.
Resolution Path
- 1Confirm the lien details and balance through account transcripts and the lien filing.
- 2Identify the specific refinance and how its proceeds improve the company's ability to pay.
- 3Apply for lien subordination (Form 14134), showing the IRS the financing supports collection.
- 4Use the freed-up cash flow to fund a realistic installment agreement on the balance.
- 5Stay current on estimated taxes to keep the account from sliding backward.
Key Lessons
- A lien is a claim on property, not a seizure — but it can quietly block financing.
- Subordination re-orders priority for one lender; discharge and withdrawal are separate tools.
- The IRS often cooperates when a transaction improves its odds of being paid.
- Staying current on estimated taxes prevents the next lien from being filed.
Can you get financing when the IRS has filed a tax lien?
Sometimes. A lien subordination (Form 14134) asks the IRS to let a specific lender move ahead of its claim, which can make a refinance possible. The IRS may agree when the financing helps it ultimately collect. It does not remove the lien — it only re-orders priority for that loan.
Relevant Resolution Options
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See My IRS OptionsFrequently Asked Questions
Is lien subordination the same as removing the lien?
No. Subordination keeps the lien in place but lets a named lender move ahead of the IRS for a specific loan. To clear a lien you would look at discharge (for a particular asset) or withdrawal (removing the public notice).
Why would the IRS agree to step behind a lender?
Because the financing can help the taxpayer keep operating and generate the income to pay the tax debt. The IRS weighs whether subordination ultimately improves its ability to collect.
Does a federal tax lien hurt my credit?
Tax liens were removed from the major consumer credit reports in 2018, so they no longer directly lower your score. They remain public records, however, and lenders, bonding companies, and title searches still find them.
Romy Cruz, EA
Licensed Enrolled Agent
Licensed Enrolled Agent (EA) · 15 Years IRS Tax Resolution
Romy helps individuals and businesses resolve IRS tax issues including liens, levies, installment agreements, penalty relief, and offers in compromise.
Content is reviewed periodically for accuracy and updated to reflect current IRS guidance and regulations.