When and How the Tax Lien Arises

[sullupic]

To the surprise of many a Federal Tax Lien shows up on a credit report, by mail, or loads of companies start tell you, a Federal Tax Lien has been filed.OUCH

Not a good day!

The federal tax lien arises when any “person” liable to pay any federal tax fails to pay the tax after a demand by the US Government for payment.

IRC § 6321. states this:

For federal tax law purposes, a “person” is defined to include individuals, trusts, estates, partnerships, associations, companies, and corporations. IRC § 7701(a)(1).

The lien is effective from the date the Government assesses the tax.that is the day IRS puts you on there computer system, that’s also called the TC 150 date in IRS Code.

If the taxpayer neglects or refuses to pay the assessed tax, then the lien is deemed to relate back to the assessment date.

Under IRC § 6322,  The Service is not required to file a NFTL in order for the tax lien to attach. As discussed later in the text, the Service may need to file a NFTL in order to have priority over the taxpayer’s other creditors.


How Long is  the Duration of the Federal Tax Lien

The federal tax lien continues until the liability for the amount assessed is satisfied or becomes unenforceable by reason of lapse of time, i.e., passing of the collection statute expiration date (CSED).

Under IRC § 6322., generally, after assessment, the Service has ten years to collect the tax liability. IRC § 6502.

However, there are some circumstances which may extend or suspend the ten-year collection period.

IRC § 6502 provides for an extension of the collection period in two situations:

The statute of limitations was extended at the same time an installment agreement was entered into.

In this case, collection action may be taken until the 89th day after expiration of the installment agreement. IRC § 6502(a)(2)(A).
Note:

The Service only secures extensions on partial payment installment agreements and only in limited situations. See IRM 5.14.2.1.3.

Release of a levy under IRC § 6343 is accompanied by an agreement to extend the statute of limitations to a specific date and that date has not yet passed. IRC § 6502(a)(2)(B); Treas. Reg. § 301.6343-1(b)(2)(ii)(D).

IRC § 6503 provides for the suspension of the collection period in several situations.

The more common situations are the following:

1.Issuance of a statutory notice of deficiency, IRC § 6503(a).

2. Assets of the taxpayer in control or custody of a court, IRC § 6503(b).

3. Taxpayer is outside of the United States for a continuous period of at least 6 months, IRC § 6503(c).

4. An extension exists for the payment of an estate tax, IRC § 6503(d).

A wrongful seizure of property or a wrongful lien on property, IRC § 6503(f).

5. A taxpayer bankruptcy filing triggering the automatic stay, IRC § 6503(h). Insolvency or Area Counsel can identify whether the automatic stay is in effect for any particular period.
Note:

If the United States files suit and reduces the tax claim to judgment, then the collection period does not expire until the judgment has been satisfied.

United States v. Overman, 424 F.2d 1142 (9th Cir. 1970); United States v. Hodes, 355 F.2d 746 (2nd Cir. 1966).

State statutes of limitations cannot affect the duration or existence of the federal tax lien. Overman, 424 F.2d at 1147.