These liens are provided for by IRC § 6324. In addition to the general federal tax lien, there are also special liens for estate and gift taxes that arise at the date of death or the date of the gift, respectively. However, whether the state-created interest constitutes property or rights to property to which the federal tax lien attaches is a matter of federal law. The Supreme Court has held that state law controls the determination of the existence of any legal interest that a taxpayer has in a property. section 6321, a federal tax lien attaches to all of a taxpayer’s property or rights to property. However, the Government’s lien under §6321 cannot extend beyond the property interests held by the delinquent taxpayer. Section 6321 provides that if any person liable to pay any tax neglects or refuses to pay the tax 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 belonging to such person. The general tax lien under Section 6321 is broad it generally encompasses all of the taxpayer’s property or rights to property to secure payment of tax liability. The federal tax lien arises automatically-that is, by operation of law-when a taxpayer fails or refuses to pay tax after notice and demand. The primary federal tax lien is the “general” tax lien, sometimes referred to as the “secret” or “silent” lien.
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The tax lien created under the Internal Revenue Code is a statutory lien. Liens can be divided into three general categories: common-law liens, consensual liens, and statutory liens. A lien does not change the ownership of the property it merely identifies the property as having a claim against it. The law generally defines a lien as a charge or encumbrance on the property of another as security for a debt or obligation. See our separate post on IRS Seizures: The Good, the Bad, and The Uglyfor more on topics related to levies and seizures. The IRS also uses the levyprocess or seizures to collect taxes where available. Tax liens are one of the primary tools that the IRS uses to collect outstanding taxes. However, the date of the NFTL filing is important for determining the IRS’s priority against other creditors. As a result, the NFTL itself does not actually create the lien-it merely informs others of a lien that already exists by statute. a Notice of Federal Tax Lien or NFTL).Ī Notice of Federal Tax Lien is a document that is publicly filed with state and local jurisdictions in order to put other creditors on notice of the IRS’s lien interest. The federal tax lien-sometimes referred to as a “statutory lien” or “silent lien”-is often confused with the notice of the lien’s existence, which is generally filed by the IRS at a later date (i.e.
The Internal Revenue Code (IRC) governs when and how a federal tax lien arises.
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