Which statement best describes a tax lien?

• A. A lien is the actual seizure of assets.
• B. A lien is a penalty assessed on late filing.
• C. A tax lien is a security interest in property to secure the tax debt.
• D. A tax lien cancels the tax debt.

Answer: (C)

A tax lien is a security interest in your property to secure the tax debt. It acts as a claim the government has against your assets, attaching to real and personal property and even to future acquisitions, so the government has priority to be paid from those assets if you sell or refinance. It’s not a seizure of assets—that would be a levy, which is the actual taking of property to satisfy the debt. It’s not a penalty for late filing, which is a separate charge, and it doesn’t cancel the tax debt by itself. The lien simply secures the amount owed and remains until the debt is paid or the lien is released, and it can affect your credit and your ability to transfer property.