Dealing with IRS liens
By filing a Notice of Federal Tax Lien, the IRS establishes its interest in taxpayer’s property as a creditor. The IRS tax lien is a claim against taxpayer’s property, including property that is acquired after a lien is filed. IRS tax liens are required by law to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate.
Once an IRS tax lien is filed, it may appear on your credit report and it may harm your credit rating. Therefore, it is important that you work to resolve your IRS tax liability as quickly as possible, before lien filing becomes necessary. Once a lien is filed, the IRS generally cannot issue a Certificate of Release of Federal Tax Lien until the taxes, penalties, interest, and recording fees are paid in full.
When a taxpayer owes back taxes to the IRS, the IRS gains a tax lien on all that person's assets after meeting certain statutory requirements. The IRS has the power to collect back taxes by levying on taxpayers' property as a result of a tax lien. A tax lien attaches to all rights, title and interest of the taxpayer. Once the IRS has a tax lien on all of taxpayer’s assets, IRS may enforce that lien by administratively levying his or her assets.
The effect of the Federal IRS Tax Lien statute is that when any person fails to pay any assessment of tax, plus interest, penalties, or costs, a lien in favor of the United States arises upon all property and rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. Even if the taxpayer makes partial payment, a tax lien will arise for the balance of the tax.
IRS tax lien is filed by the government to protect its interests. Recorded with one or several county recorders, an IRS tax lien basically tells the world that you owe back taxes to the IRS, and is generally devastating to the taxpayer's credit. tax liens make it very difficult to obtain credit or to sell real estate.
Notice of Federal IRS Tax Lien
IRS Tax Liens gives 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:
- IRS assess the tax liability
- IRS send you a Notice and Demand for Tax Payment (a bill that tells you how much you owe in taxes)
- You neglect or refuse to fully pay the debt within 10 days after IRS notifies you about it.
Once the IRS meets these lien requirements, an IRS tax lien is created for the amount of your IRS tax debt. By filing notice of this tax lien, your creditors are publicly notified that the IRS has a claim against all your property, including property you acquire after the lien was filed. The IRS tax 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 an employer).
Releasing IRS Tax Lien
IRS will issue a Release of the Notice of Federal Tax Lien:
- Within 30 days after you satisfy the tax due to the IRS (including interest and other additions) by paying the debt or by having it adjusted;
- Within 30 days after IRS accepts a bond that you submit, guaranteeing payment of the debt.
Download Publication 1450, Request for Release of Federal Tax Lien.
Generally, unless the IRS refiles the tax lien, IRS tax liens get automatically released after 10 years.
Payoff Amount of Your IRS Tax Lien
The full amount of your IRS tax lien will remain a matter of public record until it is paid in full. However, at any time, you may request an updated lien payoff amount from the IRS to show the remaining balance due.
Applying for a Discharge of a Federal Tax Lien.
If you are giving up ownership of property, such as when you sell your home, you may apply for a Certificate of Discharge for an IRS tax lien. Each application for a discharge of a tax lien releases the effects of the IRS tax lien against one piece of property.
Download Publication 783, Discharge of Property from the Federal Tax Lien.
Making the IRS Tax Lien Secondary to Other Liens
In some cases, IRS tax liens can be made secondary to other liens. That process is called subordination.
The IRS District Director has the authority to issue a certificate of subordination of a tax lien that is filed on any part of a taxpayer's property subject to the IRS tax lien:
- If you pay an amount equal to the tax lien or interest to which the certificate subordinates the Lien of the United States.
- If the District Director believes that issuance of the certificate will increase the amount the United States may realize, or the collection of the tax liability will then be easier. This applies to the property that the certificate is for or any other property subject to the tax lien.
Download Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien.
Withdrawing Tax Lien
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,
- Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the government.
We will give you a copy of the withdrawal, and if you write to us, we will send a copy to other institutions you name.
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 an IRS tax lien. IRS may give you this lien 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, or 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. Some of the issues you may discuss include:
- You paid all you owed before we filed the lien,
- IRS assessed the tax and filed the lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
- IRS made a procedural error in an assessment,
- The time to collect the tax (called the statute of limitations) expired before IRS filed the lien,
- You did not have an opportunity to dispute the assessed liability,
- You wish to discuss the collection options,
- You wish to make spousal defenses.
- 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. You will have a 30-day period, starting with the date of the determination, to bring a suit to contest the determination.
Download Publication 1660, Collection Appeal Rights