When Does the IRS File a Tax Lien?

The Internal Revenue Service is a very powerful creditor. While many people are aware of the IRS’ ability to seize assets such as levying a bank account, garnishing wages or seizing real estate, many are aware of one of the IRS’ most powerful collection tools: the tax lien. This article has been prepared by a Columbus area tax attorney at the McGuire Law Firm to provide additional information as to when the IRS is likely to file a tax lien. If you are facing an IRS issue and require an attorney to assist you in your options, get in touch with the McGuire Law Firm in Columbus for a free consultation. 

The Automatic or “Silent” Lien

The title of this article may be somewhat misleading because in fact, the IRS does not need to “file” a lien so to speak. The IRS has what is called an automatic or “silent” lien which does not require the actual filing of the lien within the public record. A “silent” lien or statutory lien allows the IRS to have a legal claim on all of a taxpayer’s assets and later acquired assets as soon as a taxpayer owes money to the IRS, receives notice from the IRS demanding payment and does not pay. This lien arises automatically under law pursuant to Internal Revenue Code Section 6321.

The Notice of Federal Tax Lien

The IRS will also file a notice of federal tax lien that then becomes public record and can give the IRS priority over other creditors. Although, the IRS may be able to file the notice of federal tax lien after certain periods of time, there are certain times that the IRS is much more likely to file the notice of federal tax lien if the notice has yet to be filed. Below are some common triggering events when the IRS is likely to file the notice of federal tax lien.

When a Revenue Officer is Assigned

If a revenue officer is assigned to collect on a tax debt and the notice of federal tax lien has not been filed, it is very likely the revenue officer will file the notice of federal tax lien within a short period of time of being assigned to collect on the tax debt and making contact with the taxpayer.  If the taxpayer is communicating with the revenue officer and has a promising means by which to pay the tax liability, the revenue officer may hold off on the lien filing for a while.  For example, if a taxpayer is working on a loan or pulling equity from their real estate the revenue officer may agree to not file the lien for the time being because the lien filing could disrupt the loan and actually hinder the taxpayer’s ability to pay and resolve the tax debt.  However, if the taxpayer is unable to obtain the loan within a certain period of time the revenue officer may have no choice but to file the notice of federal tax lien.  

The Lien Filing Upon Finalizing an Installment Agreement

It may seem counterintuitive but if a taxpayer owes more than $50,000 and has just set up an installment agreement, the IRS is likely to file the notice of federal tax lien if the lien filing has not occurred.  The formalization of the installment agreement puts “eyes on” the issue and liability when the agreement is being approved or finalized and almost acts as a reminder and triggers the lien filing.  This lien filing can be frustrating to taxpayers who feel they are working to resolve the matter and almost feel like the IRS is filing the lien as retribution.  However, the lien filing is just part of the IRS’ collection process and policy and the statutory right to file the lien is to protect the government’s interest.  

The Lien Filing Upon an Offer in Compromise Being Rejected

As above with a lien being filed when an installment agreement is finalized, when the IRS rejects an offer in compromise either at the offer unit level or via an appeals officer, this often acts as a triggering event for the IRS to check on whether or not a tax lien has been filed and if not filed, file the notice of federal tax lien.  Again, this is not necessarily retribution but rather the status of the case just led to the IRS checking to see if a lien had been filed or not, and if not filed, it is just time to file the notice of tax lien.  

Assistance With Tax Liens and IRS Matters

Tax liens can be very problematic to both individual and business taxpayers as it may hinder their ability to obtain loans or financing and can impact credit if the lien is picked up by a credit bureau.  If the IRS has filed a notice of federal tax lien against you as an individual or your business, you should contact a tax attorney to assist with resolving the underlying tax debt that led to the tax lien.  You can contact The McGuire Law Firm to discuss your tax issues and questions with an experienced tax attorney.