Federal Tax Liens
We here at Arizona Tax Liens.com receive a lot of questions about tax liens, especially federal tax liens. To help answer as many of these federal tax lien questions as possible, we've created this special federal tax lien information page. Please peruse it and let us know if you have any additional questions.
Federal Tax Lien Information:
Federal tax liens give the US government, such as 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 tax lien 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 tax lien debt within 10 days after the IRS notifies you of it.
Once these federal tax lien requirements are met, a tax lien is created for the amount of your tax debt. By filing notice of this tax lien, your creditors are publicly notified that the IRS has a claim against all your personal property, including property you acquire after the federal tax lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate, such as Arizona real estate.
The federal 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 a business).
Please Use Caution!
Releasing a Federal Tax Lien
Once a federal tax lien is filed, your personal or business credit rating may be harmed. You may not be able to get a loan to buy a car or a house, sign a lease or get a new credit card. Therefore, it is very important that you work to resolve your tax lien liability as quickly as possible, before federal tax lien filing becomes necessary.
The IRS will issue a Release of the Notice of Federal Tax Lien within:
- 30 days after you satisfy the federal tax due (including interest and other additions) by paying the tax lien debt or by having it adjusted, or
- 30 days after they accept a bond that you submit, guaranteeing payment of the tax lien debt.
You must also pay all fees that a state, such as Arizona, or other jurisdiction charges to file and release the tax lien. These fees will be added to the total amount you owe.
Around ten years after a federal tax lien is assessed, a lien releases automatically if the IRS has not filed it again. If the IRS knowingly or negligently do not release a Notice of Federal Tax Lien when it should be released, you may sue the federal government, but not IRS employees, for damages
Federal Tax Lien Payoff Amount
The entire amount of your federal tax lien will remain a matter of public record until it is paid off in full, including all additions and accruals. Keep in mind though, that at any time, you may request an updated federal tax lien payoff amount to show the remaining balance due by calling the IRS toll-free customer service telephone number at 1-800-913-6050. An IRS employee will issue you a letter with the current amount that you must pay before they will release the Notice of Federal Tax Lien.
Requesting a Discharge of a Federal Tax Lien
If you are giving up ownership of personal property, such as when you sell your home or commercial property, you may apply for a Federal Tax Lien Certificate of Discharge. Each application for a discharge of a federal tax lien releases the effects of the lien against only one piece of personal property. Note that when certain conditions exist, a 3rd party may also request a Federal Tax Lien Certificate of Discharge. If you're selling your primary residence, such as your home, you may apply for a taxpayer relocation expense allowance. As always, certain conditions and limitations apply.
Making the IRS Federal Tax Lien Secondary to Another Lien
In almost all cases, a federal tax lien can be made secondary to another lien, such as an Arizona Tax Lien. That process is called subordination.
Withdrawing Federal Tax Liens
According to the law, a filed notice of federal tax lien can be withdrawn only if:
- The federal tax lien notice was filed too soon or not according to IRS procedures,
- You entered into an installment agreement to pay the tax lien debt on the notice of lien (unless the agreement provides otherwise),
- Withdrawal will speed collecting the federal tax, or
- Withdrawal would be in your best interest (as determined by the Taxpayer Advocate), and in the best interest of the U.S. government.
The IRS will give you a copy of the federal tax lien withdrawal, and if you write to them, the IRS will send a copy to other institutions you name
Federal Tax Lien Inquiries
If you have questions regarding basic federal tax lien inquiries, such as routine tax lien releases and tax lien payoff amounts, please contact the Centralized Lien Unit by calling the toll free telephone number (1-800-913-6050).
When faced with a complex federal tax lien issue, always consider contacting the Collection Technical Services (TS) Advisory function. TS Advisory is a collection compliance function that interacts with taxpayers on really complex lien issues such as: Federal Tax Lien Certificate of Discharge, Subordination, Subrogation, Non-Attachment, Withdrawal and other complex lien issues.
Appealing the Filing of a Federal Tax Lien
U.S. law requires the IRS to notify you in writing not more than 5 business days after the filing of a federal tax lien. They may give you this notice in person, leave it at your home or your usual place of business, or send it to you by certified or registered mail to your last known mailing address. You can always ask an IRS manager to review your case, and you may also request a Collection Due Process hearing with the Office of Appeals by filing a request for a hearing with the office listed on your federal tax lien notice. You must file your request by the date shown on your federal tax lien notice. Some of the issues you may discuss with the IRS include:
- You paid all you owed before the IRS filed the federal tax lien,
- The IRS assessed the tax and filed the tax lien when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
- The IRS made a procedural error in an assessment,
- The time to collect the federal tax (called the statute of limitations) expired before the IRS filed the tax lien,
- You didn't have an opportunity to dispute the assessed tax lien liability,
- You wish to discuss the tax lien collection options, or
- You wish to make spousal defenses.
By the end of your Collection Due Process hearing, the IRS Office of Appeals will issue a federal tax lien determination. That tax lien determination may support the continued existence of the filed federal tax lien or it may determine that the tax lien should be released or completely 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. All in all, it's not an easy process and not much fun, but if you are an investor, tax liens can be a great investment tool.
If you have any other Federal Tax Lien questions, be sure to check our Frequently Asked Questions section and learn more at Government Tax Lien.