IRS FEDERAL TAX LIEN

An IRS federal tax lien is when the IRS places a legal claim against your property for your unpaid tax debt. According to 26 U.S. Code § 6321, the IRS must follow certain steps:

• ✔️ STEP #1: Assess the tax liability
• ✔️ STEP #2: Send a demand for payment
• ✔️ STEP #3: Acknowledge that the taxpayer has continued to neglect or refuses to pay the debt

For further details, refer to IRS Publication 594, “The IRS Collection Process.”

• ✔️ CP504 – Notice of Intent to Levy (and Notice of Your Right to a Hearing): This notice informs you that the IRS intends to levy (seize) your assets if you do not resolve your tax debt.
• ✔️ Letter 1058 / LT11 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing: This is the final warning from the IRS before it can levy your property, and it gives you the opportunity to request a Collection Due Process hearing.
• ✔️ Letter 3172 – Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320: This notice informs you that the IRS has filed a federal tax lien against your property. Your right to request a hearing and challenge the lien’s validity are outlined in this letter.

• ✔️ IMPACT #1: Credit Report Changes: Although under the 2018 National Consumer Assistance Plan Federal tax liens are no longer reported on credit reports, they still appear on title searches.
• ✔️ IMPACT #2: Loan Approval Challenges: Lenders view tax liens as a major financial risk, often believing that if you aren’t paying your taxes, you won’t pay lenders back either.
• ✔️ IMPACT #3: Public Record Influence: IRS Federal Tax Liens are public records and are easily discovered during background checks and title searches.

• ✔️ FACT #1: Legal Claim: A federal tax lien is a legal claim by the IRS against your worldly assets when you fail to pay your tax debt.
• ✔️ FACT #2: Impact on Assets: A federal tax lien is attached to all current and future assets, including a house, car, and bank account.
• ✔️ FACT #3: Public Record: The lien is public record and will most likely impact your ability to get loans and sell your home or cars.
• ✔️ FACT #4: Expiration: A federal tax lien usually expires in 10 years, BUT the IRS can refile the lien for another 10 years.
• ✔️ FACT #5: Removal Options: You can get the lien released without paying the debt in full through alternative methods, like an Offer in Compromise.

To get a federal tax lien released, you must pay the total tax debt, including penalties and interest, and satisfy a settlement agreement like an Offer in Compromise or the CSED has passed. According to 26 U.S. Code § 6325, the IRS has 30 days of these events to release the lien. IRS Publication 1450 provides instructions for requesting a Certificate of Release of Federal Tax Lien.

If you sell your home when you have a federal tax lien, the IRS could require that the lien be satisfied before the property can be transferred to the buyer. According to 26 U.S. Code § 6323, the proceeds from the sale of your home will typically go toward paying off the tax debt. The IRS could also allow the sale to proceed while keeping the lien on other assets.

The difference between a federal tax lien and a tax levy is that a lien is viewed as a way for the government to protect its financial interest by placing a legal claim on your assets, while a levy is when the IRS actually seizes your property to satisfy the debt. A levy is enforced under 26 U.S. Code § 6331 and allows the IRS to take your assets to settle the unpaid tax debt.

There are ways to avoid a federal tax lien, including filing your tax returns on time, paying your taxes in full, or setting up a payment plan with the IRS. The IRS could also waive a federal tax lien if you prove that you would lose your job if the lien were placed. Making a settlement offer, such as an Offer in Compromise, can also help prevent a lien from being filed.

To get a federal tax lien payoff amount, you can contact the IRS directly by calling the number on your Notice of Federal Tax Lien, calling 1-800-829-1040, or by submitting a written request to the address provided on the letter 3172, which you received. The federal tax lien payoff amount will be all-inclusive, breaking out the original tax debt, accrued penalties, and interest. IRS Publication 4235 provides additional information on contacting the IRS for lien-related inquiries.

IRS federal tax liens are public information because the Notice of Federal Tax Lien is filed with local or state authorities to alert creditors of the government’s legal claim. This information will typically appear in background checks and title searches. IRS Publication 594 provides a detailed explanation of how liens are managed.

A federal tax lien lasts until the tax debt is paid in full, a settlement agreement is satisfied, or the Collection Statutory Expiration Date (CSED) has passed. The CSED date is generally 10 years from the tax assessment date, as specified in 26 U.S. Code § 6502. The IRS can refile a tax lien under certain circumstances; CSED is extended due to an installment agreement or tolling events like bankruptcy. IRS Internal Revenue Manual IRM Section 5.12 provides detailed guidance.