IRS Liens

 

Notice of Federal Tax Lien


Liens give the IRS a legal claim to your property as security or payment for your tax debt. A Notice of Federal Tax Lien may be filed only after:

• The IRS assesses the liability;
• The IRS sends you a Notice and Demand for Payment - a bill that tells you how much you owe in taxes; and
• You neglect or refuse to fully pay the debt within 10 days after you have been notified about it.

 

Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.

The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business).

 

Caution!
Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary.

 

Releasing a Lien
The IRS will issue a Release of the Notice of Federal Tax Lien:
• Within 30 days after you satisfy the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
• Within 30 days after we accept a bond that you submit, guaranteeing payment of the debt.

 

In addition, you must pay all fees that a state or other jurisdiction charges to file and release the lien. These fees will be added to the amount you owe. Refer to Publication 1450, Request for Release of Federal Tax Lien (PDF).

 

Usually 10 years after a tax is assessed, a lien releases automatically if we have not filed it again. If the IRS does not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government for damages. The full amount of your lien will remain a matter of public record until it is paid in full, including all accruals and additions.

 

If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If you're selling your primary residence, you may apply for a taxpayer relocation expense allowance. In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination.

 

Withdrawing Liens
By law, a filed notice of tax lien can be withdrawn if:
• The notice was filed too soon or not according to IRS procedures,
• You entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
• Withdrawal will speed collecting the tax, or
• Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.

 

Appealing the Filing of a Lien
The law requires the IRS to notify you in writing not more than 5 business days after the filing of a lien. The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it by certified or registered mail to your last known address. You may ask an IRS manager to review your case, and you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your notice. You must file your request by the date shown on your notice.


At the conclusion of your Collection Due Process hearing, the IRS Office of Appeals will issue a determination. That determination may support the continued existence of the filed federal tax lien or it may determine that the lien should be released or withdrawn. If you disagree with Appeal's determination, there is a 30-day period starting with the date of determination, in which you may request judicial review in a court of proper jurisdiction.

 

Tax Levies

 A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.

If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance,

  • The IRS could seize and sell property that you hold (such as your car, boat, or house), or
  • The IRS could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).

The IRS usually levies only after these three requirements are met:

  • They assessed the tax and sent you a Notice and Demand for Payment;
  • You neglected or refused to pay the tax; and
  • They sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.

 

Contact

The Law Offices of Ralph W. Flick, P.S.

4423 Pt. Fosdick Drive, Suite 100-7, Gig Harbor, WA 98335
(253) 509-3013

The Law Offices of Ralph W. Flick, P.S. © 2010. All rights reserved.