IRS filing of the Notice of Federal Tax Lien

By | December 6, 2015

The filing of the Notice of Federal Tax Lien. If it hasn’t already been done, it will be done here. Also, if a taxpayer or representative fails to provide a Collection Information Statement, collection actions like summons, levy, and seizures are real possibilities. A note on Appeals here; within the last year, Appeals has adopted what it calls the Judicial Approach and Culture. The federal tax lien gives the IRS a legal claim to all of the taxpayer’s property for the amount of the tax liability. The federal tax lien arises when the tax liability has been assessed, a demand is made for its payment, and the taxpayer does not pay it. Filing a Notice of Federal Tax Lien.

IRS Notice of Federal Tax Lien

This approach enhances Appeals’ position as an independent appellate function by getting Appeals out of the investigative process. I have to stress: nothing about the Judicial Approach and Culture changes the taxpayer’s fundamental right to an appeal.


What is a Federal Tax Lien?

The point is if Collection doesn’t have the information to make a determination, then Appeals can’t either. It’s not Appeals’ job to develop cases. It’s their job to make an impartial determination based on the available evidence. Some people use the words “lien” and “levy” interchangeably. A tax lien is a document filed by the IRS to protect the government’s ability to collect money. A levy is the forced collection of tax, for example by confiscating money directly out of a bank account or paycheck.


Tax Appeals Cases

The bottom line: Appeals isn’t going to reject cases. They are going to say, “Look, until both sides have what they need to make a decision, Appeals can’t resolve a dispute.” So, give each other what’s needed, talk it over, and if you still can’t come to an agreement, then come to Appeals. Let’s look at some payment options besides streamlined. The key to remember is if you don’t meet streamlined, a longer and larger payment won’t be an option if the taxpayer has assets they can borrow against or sell to full pay the tax liability. If the taxpayer can’t borrow or sell assets, an installment agreement may still be an option.


Example of Tax Appeals Case

For example, let’s say an individual owes $75,000. They submit a Collection Information Statement showing they have no assets to sell or borrow against, but they can make payments. In this case, we’d probably do an installment agreement.


Notice of Federal Tax Lien filed

But let’s say they don’t want to have the Notice of Federal Tax Lien filed; then they’d need to come up with a way to pay off about $25,000 of the $75,000 to bring it into Streamlined Installment Agreement criteria. If they can’t bring it down, a Notice of Federal Tax Lien will be filed. Also, if the taxpayer brings down their balance to under $50,000, they would need to set up the installment agreement as a direct debit. Now, let’s say the same scenario, but an operating business owing $75,000 in trust fund payroll taxes.

IRS Collection Information Statement

There are no assets to borrow against or liquidate according to the Collection Information Statement, but they can make payments, and they can pay off within the collection statute of limitations.


Paying Tax Lien with IRS Installment Plan

The installment agreement can be granted, but with conditions: a Notice of Federal Tax Lien would need to be filed in most cases; they’d need to demonstrate that the problem has been resolved and they can stay in compliance with both filing and paying; and we’d need to conduct the Trust Fund Recovery Penalty interview.