If the taxpayer does not pay a tax liability in full and fails to find an alternative method to pay the tax, the IRS may file a Notice of Tax Lien against the taxpayer's property. § 6320. By filing a lien, the IRS is making a legal claim to the taxpayer's property as security for payment for the tax debt. (§ 6321) The IRS may only file a Federal Tax Lien after It assesses the liability;
Once these requirements are met, a lien is created for the amount of the taxpayer’s tax debt. The lien attaches to all the taxpayer’s property (such as the taxpayer’s house or car) and to all the taxpayer’s rights to property (such as the taxpayer’s accounts receivable, if the taxpayer is an employer). It is not necessarily filed in the county clerk's office.
The IRS may issue a Release of the Notice of Federal Tax Lien (§ 6325) :
In addition, the taxpayer must pay all fees that a state or other jurisdiction charges the taxpayer to file and release the lien. These fees will be added to the amount the taxpayer owes.
If the IRS has not filed it again, the lien will usually released automatically 10 years after a tax is assessed. The taxpayer may sue the federal government for damages If the IRS knowingly or negligently does not release a Notice of Federal Tax Lien when it should be released.
The full amount of the taxpayer’s lien will remain a matter of public record until it is paid in full. However, at any time the taxpayer may request an updated lien payoff amount to show the remaining balance due. An IRS employee can issue the taxpayer a letter with the current amount due in order to release a lien.
If the taxpayer is giving up ownership of property, such as when the taxpayer sell her home, she 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 the taxpayer is selling the primary residence, the taxpayer may apply for a relocation expense allowance. Certain conditions and limitations apply.
By law, a filed notice of tax lien can be withdrawn if:
The IRS will give the taxpayer a copy of the withdrawal and at the taxpayer's request, the IRS will will send a copy to other institutions.
The IRS is required to notify a taxpayer in writing within five days after it files a Notice of a Tax Lien. IRC § 6320. The IRS may give the taxpayer this notice in person, leave it at the her home or her usual place of business or send it by certified or registered mail to the her last known address. The notice, also known as a Collection Due Process notice, must specify the amount of the tax liability and must state that the taxpayer has a right to request a CDP hearing within 30 days. The notice must also outline the administrative appeals rights of the taxpayer and the provisions and procedures to obtain the release of the levy or lien. The taxpayer must file his or her request for a CDP hearing by the date shown on the taxpayer’s notice. It is the customary practice of the Clinic to request a CDP hearing.
A CDP hearing is conducted by an impartial employee of the IRS Office of Appeals. The Appeals Officer should have no prior involvement in the issue that resulted in the collection of the unpaid liability. CDP hearings are conducted informally at the Appeals office. No transcript is taken of the conference and no oath or affirmation is taken. Some of the issues the taxpayer may discuss include:
At the hearing, the taxpayer may also challenge the existence of the liability or the amount of the liability only if he did not receive a Statutory Notice of Deficiency, did not receive it in time to file a tax court petition, or if he did not had any opportunity to dispute the liability. The taxpayer may not raise an issue that was raised and considered at a prior administrative or judicial hearing.
Prior to issuing a determination, the Appeals Officer is required to obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedure have been met.
The Appeals Office will issue its findings in a dated Notice of Determination sent by certified mail or registered mail to the taxpayer § 6320 (c), § 6330 (d) . While there is no time limit on when the IRS must issue its findings, the regulations require the Appeals Officer to conduct the hearing “as expeditiously as possible.” Once the finding is issued the taxpayer has 30 days to request judicial review.
The Notice of Determination is required to:
In some instances, the taxpayer may seek to refinance a loan to secure a better interest rate or to take some equity out of the property. A Notice of Federal Tax Lien generally prevents a lender from refinancing the loan. Under I.R.C. 6325(d), Congress has provided relief for taxpayers by permitting the subordination of the federal tax lien. This can occur in three instances: the refinancing permits the taxpayer to pay the amount of tax owed on the lien; the collection of the tax will ultimately be facilitated; or the IRS determines that the United States will be adequately secured after the subordination. This relief permits a refinancing to improve the interest rate on the loan even when there is no cash due the taxpayer. This refinancing also facilitates collection because the taxpayer is able to afford his or her home and the reduced payments may allow the taxpayer to pay some or all the tax owed over time.
Publication 784 sets out the procedure and requirements for subordination. The request is by a letter with enclosures specified in the publication. The Subordination Notebook is sent to the local Technical Support office. For Georgia, it is sent to: Internal Revenue Service
Attn: Technical Services Group 3
Stop 333-D, Room 900
401 West Peachtree Street
Atlanta, GA 30308-3539
IRC §6320: Notice and opportunity for hearing upon filing of notice of lien
TD 2002FED ¶ 47,017: Treasury Decision 8979, (Jan. 17, 2002)
Documents on IRS.gov
Request for Due Process Hearing
IRS Form 12153.pdf