Concerning Federal Tax Liens and Levies

The days of a gentler, more compassionate IRS seem to be gone. The IRS has enacted Circular 230 and increased the number of audits. It has also become very aggressive in pursuing taxpayers who are not paying their tax obligations. The IRS has a few tools in its collection arsenal, including liens and levies. However, the IRS is aggressive in applying these tools. The IRS used to automatically file liens for taxes over $5,000 up until 2011. The IRS launched a new program called “fresh start”, which made changes to the automatic lien filings on February 24, 2011. The IRS launched a new program called “fresh start” that allowed automatic lien filings to increase from $5,000 to $10,000. It also offered other options to remove liens and make other tax-friendly changes. The IRS increased its collection efforts by using nominee liens, levies, and their counterparts, the alter-ego, transferee, and fraudulent conveyance lien and levies. These liens and levies do not have the Collection Due Process (CDP), rights that tax professionals and their clients have come to rely upon.

Federal Tax Liens and Levies

An assessment is done by the IRS to determine the amount due. This liability is recorded in the office by the Secretary. Within 60 days of the assessment, the IRS sends a notice to the taxpayer along with a demand for payment. A lien is automatically created if the taxpayer fails to pay or neglects to pay the obligation. The federal tax lien is dated back to the date that the taxpayer was assessed and continues until the amount owed is paid or until the lien becomes invalidated by time. Generally, the statute of limitations for unenforceable federal tax liens lasts ten years. The federal tax lien applies to all property and rights of the taxpayer, even after-acquired property. However, a federal tax lien cannot attach to property that was properly transferred to a taxpayer before the creation of the lien. The IRS can use one of three theories to reach property – nominee, alter-ego, and transferee liability – if a taxpayer’s property does not exist in his or her possession.

State law governs the scope and rights of property. The lien attaches to any property interest that is recognized by state law. Federal law governs how and to what extent a federal tax lien attaches to a taxpayer’s property. The general tax lien applies to virtually all property owned by the taxpayer as of the date of assessment, or any subsequent acquisitions, as long as it is in force. Code Sec. Code Sec. The lien applies to property that is transferred to which the lien attaches. Unless the IRS has filed a Notice Of Federal Tax Lien (NFTL), certain third parties are still protected. Sometimes, third parties can be protected even after the IRS files its Notice of Federal Tax Len.

This article was written by Alla Tenina. Alla is a top tax attorney in Orange County in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.