What is an IRS Tax Lien?

IRS lien notice

An IRS tax lien is a right or claim to your property. The IRS tax lien generally arises when you owe a tax debt and fail to timely pay it. The IRS lien arises at the time of assessment, i.e., the time that the IRS records a tax liability as being due.

The IRS’s lien is a general tax lien in that it attaches to all of your property. This includes all of your real and personal property, your cash, and even the property and cash you acquire after the lien arises. There are exceptions, and the rules have been changed numerous times for IRS liens.

The authority for the IRS lien is found in I.R.C, § 6321. Section 6231 provides that if:

any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest,
additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

The key terms are “any” and “all.”

The IRS Lien Notice

Until the IRS files a notice of the tax lien, you are generally able to sell your property to third parties for fair market value. These parties who pay fair market value can succeed to title to your property over the IRS.

When the IRS files notice of its tax lien, that’s a different story. Think of the IRS tax lien notice as a “you owe us” note that attaches to your property. It puts others on notice that the IRS has some right to the property.

After the IRS tax lien notice is filed, third parties are on notice of your unpaid taxes. Merely paying you full market value for your assets will not allow the third party to acquire clear title to your property.

IRS Lien, Who Cares?

The IRS lien and the IRS lien notice do not deprive you of the use or possession of your property. However, it may prevent you from selling your property or borrowing against the value of your property.

In the event that you sell property subject to an IRS tax lien, the IRS may be able to either reclaim the property from the third party and/or take the proceeds from you. Many taxpayers first learn of the IRS lien when they try to make these transfers.

How Long Does an IRS Lien Last?

The IRS tax lien can exist for many years. You might not even be aware of the lien or the notice of the lien.

The general rule is that the IRS lien lasts until the tax is satisfied or becomes legally unenforceable due to a lapse of time. This is set out in I.R.C. § 6322. The time period is generally ten years from the date of the IRS assessment.

The IRS can extend this time period by taking steps to reduce the lien to a judgment. If the IRS is successful in court, the IRS then has a judgment lien that can last for another ten years.

How Do I Know if the IRS Filed a Tax Lien Notice?

The IRS is required to send you a notice letting you know that it filed its notice of Federal tax lien.

If you did not get the notice in the mail, you may become aware of the IRS tax lien when you attempt to sell your real estate or your vehicles. The IRS tax lien places a cloud on the legal title, which means you cannot live up to your contractual agreement to deliver a marketable title on the specified sale closing date.

To avoid breach of contract claims you may have to act quickly to have the IRS tax lien removed. An experienced tax attorney can negotiate with the IRS to have the IRS tax lien removed or lifted.

And There are IRS Estate Tax Liens

IRS estate tax liens warrant special attention. The IRS estate tax lien frequently causes problems for taxpayers who are serving as the personal representatives or executors of a family or loved one’s estate.

IRS estate tax liens can prevent the executor from distributing funds as the decedent intended and they can result in the personal representative being held personally liable for any unpaid estate tax obligations.

An experienced tax attorney can help you address IRS estate tax liens.

Get Help with IRS Tax Liens

We are experienced tax attorneys in Houston, TX. We help clients with IRS tax matters, including IRS liens and IRS lien notices.

If you have a question about IRS tax liens, we would like to hear from you.

Please call us at (713) 909-4906 or schedule an appointment to talk to one of our tax attorneys about your IRS tax lien.

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