College of Law :: Georgia State University

Liens

If the taxpayer does not pay a tax liability in full and fails to work with the IRS 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.  The IRS may only file a Federal Tax Lien after (§ 6321):

1. It assesses the liability;
2. It sends a Notice and Demand for Payment (a bill that tells the taxpayer how much the taxpayer owe in taxes); and
3. The taxpayer neglects or refuses to fully pay the debt within 10 days after the IRS notifies the taxpayer about it.
   

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.

Releasing a Lien

The IRS will issue a Release of the Notice of Federal Tax Lien (§ 6325) :

1. Within 30 days after the taxpayer satisfies the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
2. Within 30 days after it accepts a bond that the taxpayer submits, guaranteeing payment of the debt.
   

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.

Payoff amount

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.

Applying for a Discharge of a Federal Tax 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.

Withdrawing Liens

By law, a filed notice of tax lien can be withdrawn if:

1. The notice was filed too soon or not according to IRS procedures,
   the taxpayer entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
2. Withdrawal will speed collecting the tax, or
3. Withdrawal would be in the taxpayer’s best interest (as determined by the Taxpayer Advocate) and the best interest of the government.
   

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.

Appealing the Filing of a Lien

The IRS is required to notify a taxpayer in writing at least 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 know 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.

Hearing Procedures
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:

1. The validity, sufficiency, and timeliness of the CDP Notice and the request of the CDP hearing
2. Any relevant issue relating to the unpaid tax raised by the taxpayer at the hearing
3. Any appropriate spousal defenses raised by the taxpayer at the hearing
4. Any challenges by the taxpayer to the appropriateness of the collection action
5. Any offers for collection alternatives made by the taxpayer and
6. Whether the proposed collection action balances the need for the efficient collection of taxes and the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary.
   

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:

1. State whether the IRS met the requirements of any applicable law or administrative procedure
2. Decide any allowable issue raised by the taxpayer at the hearing (for example, challenges to the liability, spousal defenses, the appropriateness of the collection action)
3. Decide whether the levy is required for the efficient collection of taxes in light of a taxpayer’s concern that the collection action be no more intrusive than necessary
4. Set forth any agreements reached with the taxpayer, any relief given to the taxpayer, and any actions that the taxpayer or IRS are required to take and
5. Advise the taxpayer that the judicial review to the Tax Court or a U.S. District Court must be sought within 30 days of the date of the Notice of Determination (Temporary Reg. §301.6330-1T(e)(3), Q&A –E7)

Resources

Sample IRS Letter 3172 - Notice of Tax Lien and Right to CDP Hearing

Appeals Conference

Collection Due Process

Internal Revenue Code

IRS Forms and PuBLications