IRS tax lien collection process

IRS TAX LIEN – What Happens When the IRS Files a Tax Lien

If you don’t file and pay your taxes, things can get pretty bad with the IRS.  One of the worst things that can happen is the IRS may file a Notice of Federal Tax Lien.

IRS tax lien collection processBasically, a tax lien is a claim against your property.  It is not a seizure of your property, such as a bank levy or wage garnishment.  A tax lien is the IRS’s way to ensure they get first rights to your property over other creditors.  For example, if you go to sell your house, the IRS will have a claim when you go to sell it, in the amount of the tax lien attached.

Do I have an IRS Tax Lien? How do I know an IRS tax lien has been filed?

The filing of a federal tax lien should not be a surprise.  The IRS must follow the following procedures:

  1. A tax assessment amount is made against you when you owe on an original return filed by you and not paid off OR by the IRS filing their own tax return for you called a substitute return (“SR”). They receive this SR authority through IRC Section 6020(b).

If the IRS files an SR, be sure to file an original return for “Reconsideration.”  This should be done because SR’s commonly overstate actual tax liability.  These types of returns are only based on information the IRS has and it does not include any additional expenses or exemptions of which you may be entitled.

  1. The IRS then demands payment through several types of notices for each period owed. This is called the “Collection Process.”  Before the IRS can place a tax lien on your property or collect in any other manner, they must issue a series of notices regarding the outstanding balance due.  These notices continue until (1) you pay your account in full (2) the statutory period of time to collect expires (3) you get approved for a payment plan (4) you qualify for a non-collectible status due to financial hardship plan or (5) you settle with an offer in compromise.
  2. The taxpayer does not pay the tax bill in full by the due date. If this is the case, the IRS will move forward and file a tax lien with the county.  The most important letter notifying you that a tax lien has been filed is the Notice of Federal Tax Lien.

What are the effects of a Federal IRS tax lien?

Once a tax lien is filed, it becomes a matter of public record.  It is a document filed with a county government (usually where a taxpayer lives or conducts business).  Its purpose is to notify the general public that there is an unpaid federal tax debt.  It attaches to all property, both personal and real property.  Effects of a Federal tax lien include:

  • damage to a taxpayer’s credit report by lowering the credit score
  • difficulty in qualifying for financing and loans
  • difficulty in qualifying for credit and insurance
  • losing government contracts and business
  • homes harder to sell due to attached tax lien

If the effects are severe and the IRS tax lien is harming your livelihood, it is important to look into ways of removing a tax lien.

In reality though, the IRS does not enforce the tax lien against your property unless the property:  (1) has value and equity and (2) is not necessary to your health and welfare (household goods, a car providing transportation to work, and necessary business equipment to keep business afloat as it is necessary to your health and welfare).

Taxpayers needing assistance in dealing with IRS tax liens and other IRS problems should seek the advice of a tax attorney.  The San Diego Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for IRS tax resolution at (619) 639-3336. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.


Keywords:  Federal Tax Lien, Notice of Federal Tax Lien, IRS Tax Lien, IRS problems