A Federal Tax Lien (FTL) is the government’s legal claim against your property for uncollected assessed taxes. This lean is a statutory lien (IRC §6321) as it arises by operation of law and sometimes referred to as a “silent lean” because the lien is created without notice. It attaches to a taxpayer’s current and future property and rights to property for the amount of the liability. The following must occur for a tax lien to arise:
- An assessment must have been made.
- Notice and demand for payment must have been made.
- The taxpayer must have neglected or refused to pay.
Once the lien exists it is controlled by IRC §6322. The origin date of the lien is the date of the tax assessment, the lien will stay in place until satisfied or until unenforceable due to the expiration of the statute of limitations on the underlining tax assessment.
Notice of Federal Tax Lien (NFTL) is the public notice filed with the clerk of the county that the taxpayer lives in or has property in. The NFTL puts 3rd parties on notice that the taxpayer owes back taxes and the government has rights to the taxpayer’s property. Additionally, the NFTL informs 3rd parties of the date of lien (date of assessment) for priority purposes.
Filed Tax Liens can have Negative Effects! Once a tax lien is filed it is now public record and taxpayer will be contacted by tax resolutions companies. Many of these taxpayers are personally embarrassed about the filed tax lien and their tax debts. However, for those taxpayers who have no shame there are tangible negative effects including, the inability to obtain bank financing, and damage to credit score.
“A filed tax lien puts the world on notice of a tax liability, whereas a tax levy is the taking of property in payment of that tax liability”
A Tax Levy is the taking of property for payment against a tax debt. The IRS authorizes levies to collect delinquent tax. Any property or right to property that belongs to the taxpayer can be levied unless it is exempted by statute. The IRS commonly levy:
- Bank Accounts,
- State Tax Refunds,
- Account Receivable (3rd Party Levies)
The taxpayer does have rights available to prevent a levy and may offer other collection alternatives at a Collection Due Process Hearing. The best way to prevent a levy is to respond to tax notices and if possible setup an Installment Agreement, or submit an Offer in Compromise with the IRS. If you need help with a tax matter, including getting a tax lien withdrawn, contact us.