Federal Tax Liens and the IRS 120-Day Redemption After a Tax Deed

Most liens die at a tax sale. A federal tax lien is the exception that can follow the property to you, and it is the one surviving claim that catches tax-deed buyers off guard. It does not always survive, and when it does the exposure is usually time-limited, but the stakes are high enough that it belongs on every pre-bid checklist alongside the other liens that can outlive a sale. This guide explains the 120-day redemption right, what the government pays if it uses it, the worse case when the county never notified the IRS, and how to check a parcel before you bid. It is general information about federal law, not legal or tax advice.

Two liens, two very different fates

The delinquent property tax lien is what the county sells. It is senior, and the sale is built to clear it. A federal tax lien is different. It arises when someone neglects or refuses to pay a federal tax debt, and it attaches to their property. Against a later buyer, it only counts once the IRS files a Notice of Federal Tax Lien in the office the state designates for real property, usually the county recorder or register of deeds where the land sits, under 26 U.S.C. 6323. Once that notice is on record before the sale, federal law, not the county, decides what happens to it.

The 120-day right of redemption

When real property is sold to satisfy a lien that is senior to a recorded federal tax lien, the United States may redeem the property within 120 days of the sale, or the redemption period allowed under state law, whichever is longer. Nonjudicial sales run under 26 U.S.C. 7425(d), and judicial sales under 28 U.S.C. 2410(c). The substantive floor is the same either way: 120 days at a minimum.

Two timing rules bracket it. The federal lien must have been on file more than 30 days before the sale for this framework to apply at all, and the party running the sale must give the IRS written notice, by certified mail or personal service, at least 25 days before the sale (26 U.S.C. 7425(c)).

What the IRS pays if it redeems

Redemption is not a market-value buyback, and that is the point buyers miss. Under 28 U.S.C. 2410(d) and 26 U.S.C. 7425(d), if the government redeems it must pay you the price you paid at the sale, interest at 6 percent per year from the sale date to the redemption date, the excess of necessary maintenance expenses over any income or rental value you received, and any amounts you paid to senior lienholders. You get your money and a modest return. You do not get the property, and you do not get its retail value. On a parcel you bought cheap and planned to resell high, the redemption right caps your upside at that 6 percent.

Do not confuse this with a different rule some sources conflate with it. When the IRS itself seizes and sells property by its own levy, the original owner gets 180 days to redeem at 20 percent interest under 26 U.S.C. 6337. That is a different statute for a different situation and does not describe a tax-deed buyer's exposure.

The worse case: no notice to the IRS

The 120-day window is actually the good outcome, because it is bounded. If the foreclosing party does not give the IRS legally adequate notice of the sale, the sale does not convert the federal lien into a redemption right at all. IRS guidance (Internal Revenue Manual 5.12.4) states the lien remains undisturbed, and the property stays subject to the full lien, unless the IRS separately consents or the buyer obtains a discharge. Whether a specific county gave proper notice is usually not something a buyer can confirm alone, which is exactly why a title professional earns their fee here.

Will the IRS actually redeem?

Often it does not. The IRS does not redeem every eligible property. Advisory staff weigh the taxpayer's unpaid balance, the government's equity, and fair market value against the sale price and senior liens, and they generally want a guaranteed buyer lined up before proceeding (IRM 5.12.5). If the IRS does decide to redeem, it must notify you by certified mail or hand delivery using IRS Letter 5597, and you then have only 15 days to submit a signed, itemized claim for your price and eligible expenses. Many parcels with a valid redemption right are never redeemed, but you cannot bank on that before you bid.

How to check a parcel, and your options if you find a lien

Before you bid, search the county recorder or register of deeds where the property sits, under the delinquent owner's name, for a Notice of Federal Tax Lien. There is no complete, free, nationwide database for real-property federal liens; the IRS's own lien extract covers business liens only and warns that its data may be incomplete or inaccurate. The IRS Centralized Lien Operation (800-913-6050) is the office IRS.gov directs the public to for lien verification and payoff figures. Confirm the current number and form details at IRS.gov before you rely on them.

If a lien is on record, three paths exist. You can ride out the window, if the exposure is a bounded 120 days and the numbers still work. You can seek a Certificate of Discharge, which removes the lien's effect from that one property without paying the whole tax debt (IRC 6325(b), Form 14135, IRS Publication 783). Or a creditor can seek a Certificate of Subordination, which moves another interest ahead of the IRS lien without removing it (IRC 6325(d), Form 14134, IRS Publication 784). Discharge is the tool most relevant to a buyer clearing title; subordination does not by itself resolve your redemption exposure. Any of these is a good reason to budget for a quiet title action and to confirm the specifics with a real estate attorney or title company before you close.