Tax Attorney in Columbus, Ohio
If you have failed to pay a tax debt assessed by the Internal Revenue Service (“IRS”) and you received a Notice of Demand and Payment, a federal tax lien has been created. In fact, the creation of the federal tax lien often goes unnoticed because of how simple it is to create. The federal tax lien does not depend on notice to anyone other than the taxpayer. That is why the federal tax lien is often referred to as a “secret lien.” While the IRS may file a Notice of Federal Tax Lien to have priority against other creditors, but it does not have to.
Successfully dealing with a federal tax lien requires an in depth understanding of the IRS’s lien process. This article provides the basic framework of the IRS’s tax lien process and procedures, and the circumstances in which you can remove the tax lien.
Practice Pointer: Filing a notice of tax lien can reduce a taxpayer’s credit score by up to 100 points. Thus, it is very important to seek skilled and knowledgeable advice about how to deal with the IRS when faced with a federal tax lien.
The Statutory Federal Tax Lien
If you do not pay the entire assessed amount of tax after notice and demand, a lien in favor of the IRS automatically attaches to all of your property. I.R.C. § 6321. The lien is effective from the date the IRS assesses the tax. I.R.C. § 6322. The federal tax lien is a very broad lien and attaches not only to all of your property, but also rights to property and after acquired property. A federal tax lien typically lasts until the tax liability giving rise to the lien is satisfied or the statute of limitations on collections expires. See I.R.C. § 6325(a)(1) and I.R.C. § 6502(a).
The IRS is not required to file a notice of federal tax lien for the tax lien to attach to your property. If the federal tax lien is not filed, Congress identified four parties who can defeat the lien: (i) purchasers; (ii) holders of security interests; (iii) mechanic’s lienholders; and (iv) judgment lien creditors. See I.R.C. § 6323(a). Thus, the IRS may file a notice of federal tax lien to have priority over the your other creditors.
Release, Withdrawal, Discharge, and Subordination
Option 1: Removal
The first and most basic way to remove a federal tax lien is by paying your outstanding tax liabilities. Once paid, the IRS releases the lien within 30 days.
Option 2: Withdrawal
You can also make a written request to withdraw a notice of federal tax lien. A withdrawal removes the notice of federal tax lien from public record. The decision to withdraw is discretionary, and the IRS must be persuaded that one of the four grounds for withdrawal exist. See Reg. 301.6323(j)-1.
Option 3: Discharge
A discharge simply removes the federal tax lien from one or more specific items of property in which you have an interest. Taxpayers generally seek a discharge when selling property, but there are other circumstances enumerated in I.R.C. § 6325(b).
Option 4: Subordination
A subordination allows another creditor to come ahead of the IRS, which may allow you to obtain financing. The difficulty with subordination is demonstrating that subordination will facilitate the collection of tax.
Federal Tax Lien Representation
Porter Law Office, LLC is a boutique tax controversy law firm that assists taxpayers with resolving tax debts with the IRS. If you have unpaid federal taxes and received a Notice of Demand and Payment, the IRS has likely already filed a tax lien. Knowing your options is key to resolving your tax issues. Columbus, Ohio tax lawyer Matthew R. Porter, J.D., LL.M. assists taxpayers with IRS tax liens. Contact Mr. Porter today for a free consultation to discuss your IRS tax debt.
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Helpful Federal Tax Lien Resources
- Internal Revenue Manual, Part 5, Chapter 17, Section 2, Federal Tax Liens
- Publication 783, How to Apply for a Certificate of Discharge of Federal Tax Lien
- Publication 784, How to apply for Certificate of Subordination of Federal Tax Lien
- Publication 1450, Request for Release of Federal Tax Lien
- Publication 1468, Guidelines for Notice of Federal Tax Liens