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IRS Procedures for Filing a Tax Lien
The effect of the Federal IRS Tax Lien statute is that when any person fails to pay any assessment of tax to the IRS, plus interest, penalties, or costs, an IRS tax lien in favor of the United States arises upon all property and rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. Even if the taxpayer makes partial payment, a tax lien will arise for the balance of the tax.
Below are the sections from the IRS Internal Revenue Manual that deal with IRS tax lien.
- Technical Support has the responsibility for:
- Processing and maintaining files of the Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN),
- Issuance of certificates relating to NOTICE OF FEDERAL TAX LIENs such as discharges and subordinations.
- Local management may designate some other function for input and retrieval of data on an automated lien system. Instructions in this section for forwarding documents to Technical Support includes the designated function.
Management of the Lien Program and the Automated Lien System
- Management is responsible for:
- Reviewing lien documents, for example, ensures that a name, address, and tax period information is present; verifies with revenue officer group manager or ACS manager that lien filing is correct when there is a low dollar amount (for example, the dollar amount is 0) recorder address is present, etc. (NOTE: Lien filing guidelines require that liens be filed on balances of 00 or more unless there are extenuating circumstances.)
- Ensure that lien filing criteria is adhered to. (This procedure applies to managers of employees responsible for making lien filing determinations).
- Ensuring that all lien document requests are timely processed.
- Establishing positive lines of communication with Information Technology Systems management.
- Working requests for discharge, subordination, withdrawal, and non-attachment timely.
- Responding promptly to requests for lien payoff information.
- Ensuring that taxpayers receive copies of lien documents, when requested.
- Ensuring that the Automated Lien System is efficiently managed and that procedures are followed.
- Establishing liaisons between the Automated Call Site (ACS), Service Centers and the Area Office (AO) to enable problems associated with lien processing to be effectively and efficiently resolved.
- Ensuring that NMF liens on the Automated Lien System database are released timely.
- Establishing procedures which minimize manually created liens (i.e., liens created by revenue officers to hand carry to recording offices). Ensure that manually created liens are prepared in accordance with IRM procedures.
- Establishing a quality review of all liens prior to recording.
- Ensuring that all ALS reports are generated and worked timely.
- Ensuring that RRA 98 (Collection Due Process) notices are mailed timely.
- Maintain current and accurate employee access to the database.
- Managers will review audit trails on ALS monthly. Use the Maintraud Screen to research information.
- If “requested by unknown” is displayed, use the ALS data base to determine the identity of the requestor.
- Document the requestors identity and take appropriate managerial actions, as necessary.
Creation and Duration of Lien
- A Federal Tax Lien (FTL) is created by statute and attaches to a taxpayer’s property and rights to property for the amount of the liability. This is the "statutory" or "silent" FTL. Requirements for establishing the FTL are contained in IRC 6321. The following must happen:
- An assessment must have been made;
- A demand for payment must have been made;
- The taxpayer must have neglected or refused to pay within 10 days of notification.
- The FTL will continue until the liability is satisfied or becomes unenforceable by lapse of time or a bond is accepted in the amount of the liability.
- A determination to file a Notice of Federal Tax Lien by revenue officers below GS-9 must be reviewed and approved by the supervisor prior to the notice actually being filed.
- Appropriate disciplinary action may be taken against the employee or supervisor if review procedures are not adhered to.
- The supervisor of revenue officers below GS-9 is required to:
- Review the taxpayer's information,
- Verify that a balance is due, and
- Affirm that the lien filing is appropriate given the taxpayer's circumstances, considering the amount due and the value of the property or rights to property.
- In all cases revenue officers must document the following information:
- A summary of any information the taxpayer provides that may affect the decision to file a lien;
- If the taxpayer provided information, an explanation of the employee's review and findings; and
- Verification that the amount is owed, e.g., the balance due has been checked on IDRS;
- Consider the following when determining if lien filing is appropriate:
Note: This information must be clearly marked in the history.
- The taxpayer's responsiveness to attempts at contact and collection;
- Information known about the taxpayer's financial condition;
- The taxpayer's history of delinquency,
- The taxpayer's efforts to pay the tax,
- Whether current taxes are being paid or there are returns not filed,
- Whether there is a lien already filed.
Approving the NOTICE OF FEDERAL TAX LIEN
- Revenue Officer group managers will note their review and approval using the manager's queue on their automated systems.
- Liens filed by Dyed Fuel Compliance Officers below GS-9 will be reviewed and signed by the Examination supervisor.
- When it is necessary that a manual (typed or handwritten) NOTICE OF FEDERAL TAX LIEN be prepared, supervisors will sign the NOTICE OF FEDERAL TAX LIEN for employees below GS-9.
- In all cases, document the case file.
- Make reasonable efforts, before filing the NOTICE OF FEDERAL TAX LIEN to contact the taxpayer to advise that a NOTICE OF FEDERAL TAX LIEN may be filed if payment is not made.
- Contact may be made by:
- delivered in person
- mailing a notice or letter to the last known address.
- Give the taxpayer an opportunity to make payment or other security arrangements. Explain the effect of the NOTICE OF FEDERAL TAX LIEN filing on normal business operations or their credit rating.
- Certain restrictions have been placed on the Service regarding contact with taxpayers. See IRC Section 6304, Fair Tax Collection Practices.
- If the taxpayer disagrees with the proposed lien filing advise the taxpayer of his right to appeal. Discuss both the Collection Appeals Process (CAP) and the Collection Due Process (CDP) under RRA 98. Advise the taxpayer that they will receive a 6320 notice. See IRM 5.12.3.
Taxpayer Advocate Service
Taxpayer Advocate cases and Applications for Taxpayer Assistance Orders may be initiated because of lien actions. See new IRM 5.1 (General) for criteria and procedures.
Estate and Gift Tax Liens
- The Form 668(J) or Form 668(H) must be manually prepared.
- Estate and gift tax liens are discussed in IRM 5.5, Section 8, Insolvency/Decedent Estate, and Estate Taxes Collecting Handbook.
- Manually post estate tax lien recording fees if applicable. These fees may be different than those fees used for recording the Form 668(Y)(C).
- Area offices are encouraged to arrange with local officials for the periodic billing of any recording fees, preferably on a monthly basis. Recording offices should be encouraged to submit a cover invoice and assign an invoice number.
- Within five (5) work days of receipt from the recorder's office, date stamp the voucher when received in your office, verify the accuracy of the statement, i.e., correct number of documents listed, amount on statement matches our records, etc., and approve for payment. .
- Billing vouchers must be verified by Technical Support or Case Processing and forwarded to the Finance Center in Beckley, WV for payment.
- Three methods of payment have been established.
- Direct Billing - the direct billing estimate document must be annotated on the statement (e.g., ALS printout, vendor invoice, etc. Bulk estimates have already been established, no RTS entry is needed.
- Imprest Fund - have been established in several offices to provide for pre-payment when required by the local official.
- Purchase Card - annotate the statement with the bulk estimate document number. Bulk estimates have already been established, no RTS entry is needed.
- Annotate the appropriate finance identification number for method of payment. These numbers change each fiscal year and can be obtained from each local SB/SE budget office. Refer to the Management and Finance guidelines in the SB/SE website for local budget information contacts.
Designated Payment Code
- A designated payment is a voluntary payment designated by the taxpayer to be applied in a particular manner, i.e., kind of tax, specific tax period, etc. These designations are normally followed by the Service.
- In the absence of a designation by the taxpayer, payments will be applied in a manner consistent with the provisions of Rev. Rul 73-305, unless a specific statute, regulation or procedure designates otherwise.
- A designated payment code (DPC) is mandatory on all Collection initiated posting vouchers for transaction codes 640, 670, 680, 690, 693 and 700. DPCs serve three purposes:
- They are used to identify payments that are designated for trust fund or non-trust fund employment and excise taxes.
- DPCs are used to indicate application of payments for a specific liability.
- DPCs also identify the event which resulted in the payment.
- Use DPC 07 when applying payments secured for the release of a notice of federal tax lien or to secure a certificate of discharge or subordination. Note: The mere fact that a lien has been filed does not indicate that the payment is due to the filing of a NOTICE OF FEDERAL TAX LIEN. In this case, the appropriate DPC should be used.
- The Federal Tax Lien (FTL) is not valid against purchasers, holders of security interests, mechanics lienors, and judgment lien creditors until a Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN) has been filed. The filing of the NOTICE OF FEDERAL TAX LIEN notifies creditors that the FTL exists. The FTL is valid against certain creditors named at the time the lien is filed. Refer to IRC 6321. The exception to this is the ten "superpriorities."
- Motor vehicles
- Retail purchases
- Casual sales
- Possessory liens
- Real property tax and special assessment liens
- Small repairs and improvements of residential real property
- Attorneys liens
- Certain insurance contracts
- Passbook loans
- These priorities are fully defined in the LRG.
- Purchase money security interests and purchase money mortgages have priority over a previously filed NOTICE OF FEDERAL TAX LIEN, if protected under local law. (Refer to Rev. Rul. 68-57).
- RRA 98 provides that for tax years beginning in 1999 and thereafter, the higher exemption amounts will be indexed annually for inflation (consistent with the cost-of-living adjustment (COLA) amounts for the applicable tax year) and rounded to the nearest multiple of .
Priority of Certain Other Interests
- Advances made after or property coming into existence after the NOTICE OF FEDERAL TAX LIEN is filed have priority if granted by local law. Protection under local law must be the same that is provided against a judgment lien creditor at the time the NOTICE OF FEDERAL TAX LIEN is filed.
- The priority position of unrecorded instruments, particularly mortgages, should be governed by local law. See LRG 242.
- Home Equity Line of Credit-it is advisable to investigate the facts of the case to determine how the funds were used to determine the priority of the Federal Tax Lien. If the funds are drawn after the NOTICE OF FEDERAL TAX LIEN is filed, determine if the mortgage/lender has a security interest in the real property. Verify the amount of money or money's worth that changed hands. Determine if:
- The entire amount was turned over to the taxpayer;
- The taxpayer is allowed to draw against the funds as he wants;
- A specific amount was approved;
- The taxpayer paid down the amount owed.
45-Day Disbursement Period
The FTL generally has priority with respect to security interests in property held before the NOTICE OF FEDERAL TAX LIEN is filed, if the filing is a result of disbursements made after the 46th day after the filing of the NOTICE OF FEDERAL TAX LIEN. See LRG 258.5.
Priority of Interest and Expenses
Interest and certain expenses have the same priority as the related lien or security interest. See IRC 6323(e) and LRG 259.
Considerations Before Filing
- The employee assigned the balance due is responsible for safeguarding the government's interest. There are no rules to meet all Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN) filing situations.
- Persons assigned balance dues must exercise judgment in deciding whether or not a NOTICE OF FEDERAL TAX LIEN should be filed.
Filing Outside the U.S.
No collection activity can be taken against property located outside the U.S., its territories or possessions, without an agreement or treaty with the situs country.
Procedural Guidelines (Overview)
The employee assigned the balance due is responsible for safeguarding the government's interest. There are no rules to meet all Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN) filing situations, therefore, the person assigned the balance due must exercise judgment in deciding whether or not a NOTICE OF FEDERAL TAX LIEN should be filed.
Filing Notice Guidelines
- A NOTICE OF FEDERAL TAX LIEN filing determination must be made on all assigned cases including reactivated balance dues within established time frames. The request for lien filing or the appropriate non-filing documentation must be prepared within 10 calendar days of personal contact. If contact cannot be made within the established time frame, a filing determination must be made within 10 calendar days after that time frame. (See IRM 5.1 for established time frames.) When possible, verbally advise the taxpayer of the NOTICE OF FEDERAL TAX LIEN filing.
- Determining when to file a NOTICE OF FEDERAL TAX LIEN:
- If the aggregate unpaid balance of assessment (UBA) is ,000 or more
- Then file a NOTICE OF FEDERAL TAX LIEN.
Note: Determine the need to file a NOTICE OF FEDERAL TAX LIEN when there are additional assessments. Use the transaction code date as the date of assessment for the liability when filing the NOTICE OF FEDERAL TAX LIEN.
- If an installment agreement is ,000 or more
- Then file a NOTICE OF FEDERAL TAX LIEN.
- If there are additional assessments of ,000
- Then file a NOTICE OF FEDERAL TAX LIEN.
- If an open account with an aggregate UBA of ,000 or more is being reported as currently not collectible
- Then file a NOTICE OF FEDERAL TAX LIEN.
Note:Due to Collection Due Process Appeal Rights hold case for 45 days before closing or archiving case file.
- If a case involving both assessed and preassessed periods will be reported currently not collectible
- Then the NOTICE OF FEDERAL TAX LIEN filing may be held up to include both periods on the NOTICE OF FEDERAL TAX LIEN.
- If the property is exempt by the Federal Bankruptcy Code or state insolvency proceeding
- Then file a NOTICE OF FEDERAL TAX LIEN to protect the government's interest.
- If the taxpayer resides outside the U.S. and has known assets,
- Then file a NOTICE OF FEDERAL TAX LIEN. Contact requirements are waived.
- If the party on which a levy is to be served is likely to file a priority claim under IRC 6323(a) or (c)
- Then file a NOTICE OF FEDERAL TAX LIEN even though there is no mandatory NOTICE OF FEDERAL TAX LIEN filing requirement prior to service of the notice of levy on wage, salaries, commissions, etc.
- No history is required to support the following nonfilings. Exceptions to these may be made when it is in the best interest of the government. Do not file if:
- The aggregate unpaid balance of assessment is less than ,000.
- A NOTICE OF FEDERAL TAX LIEN has already been filed and the subsequent liability is less than ,000. (NOTE: when subsequent liabilities reach ,000 file a lien.)
- The taxpayer is a corporate entity has gone through a liquidating bankruptcy or receivership regardless of dollar amount.
- The taxpayer is a defunct corporation, unless it is necessary to protect the government's interest in the liquidation of assets.
- A nonpaying officer when an adjustment to the Trust Fund Recovery Penalty is pending because the assessment has been paid by more than one officer.
- A taxpayer is deceased and there are no assets. Technical Support will make the decision to file in asset cases.
- The taxpayer resides abroad and has no known assets in the U.S.
- There is an indication that the liability has been satisfied or that credits are available to satisfy the liability.
- The taxpayer is a financial institution under control of the Resolution Trust corporation (RTC). See the section on WITHDRAWAL OF FILED NOTICE OF FEDERAL TAX LIEN, if a NOTICE OF FEDERAL TAX LIEN has been filed.
- The taxpayer has filed bankruptcy. Section 362(a) of the Bankruptcy code imposes an automatic stay that includes all creditors. A NOTICE OF FEDERAL TAX LIEN may be filed once the stay is lifted and Insolvency concurs.
- If a NOTICE OF FEDERAL TAX LIEN is filed and the taxpayer used another person's SSN, the service center entity control unit will provide a temporary SSN for use when correcting the Notice of Federal Tax Lien.
- Accrued interest and penalties added to tax should be collected during the limitation period for collecting the tax. This limitation period does not apply to bad checks, fraud penalty or certain other penalties that carry a separate collection statute expiration date.
Notice Preparation (Overview)
- The correct and timely preparation of the Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN) is the responsibility of the employee assigned the case. All NOTICE OF FEDERAL TAX LIENs must be filed through the Automated Lien System (ALS), unless there is an expedite situation. Refer to Section 1.24, Automated Lien System filing Requests.
- Revenue officers will examine their assigned balance due inventory for accounts where the collection statute has been extended and determine if refiling is appropriate.
- Technical Support will be responsible for NOTICE OF FEDERAL TAX LIEN refiling determinations on suspended cases:
- Proof of claim
- Judgment or other legal action
- Technical Support is responsible for making waiver and NOTICE OF FEDERAL TAX LIEN refiling determinations on mandatory follow-ups for currently not collectible accounts when necessary.
- The Automated Collection System is responsible for waiver and NOTICE OF FEDERAL TAX LIEN refiling on active ACS cases.
- Use the Automated Lien System to refile NOTICE OF FEDERAL TAX LIENs under normal circumstances.
- The following actions should be taken:
- Review the Notice of Federal Tax Lien for accuracy.
- Retain a copy of the filed NOTICE OF FEDERAL TAX LIEN in the case file, if manually prepared. (Part 2 after it has been returned from the recording office or an ALS facsimile).
- Mail Parts 1 and 2 to the recording office.
- Mail Part 3 to the taxpayer.
- Multiple assessments against the same taxpayer may be included on one Form 668(Y).
- If there are one or more balance dues without multiple assessments
- Then prepare a separate entry in each column for each balance due.
- If there are multiple assessments on one balance due
- Then show the assessment dates of all unpaid assessments including those penalties which carry a separate collection statute.
- If an unassessed accrued amount remains outstanding and the assessed amount is paid
- Then file a NOTICE OF FEDERAL TAX LIEN on the total accrued amount as of the date the NOTICE OF FEDERAL TAX LIEN is requested.
- If the taxpayers name on the balance due is incorrect
- Then the NOTICE OF FEDERAL TAX LIEN should state the taxpayer's name correctly. Take the actions necessary to correct masterfile. Note: There may be instances when the name on the NOTICE OF FEDERAL TAX LIEN does not agree with what is on the balance due, e.g., if the statute has been extended on one individual on a joint assessment due to a waiver. Only that taxpayer's name should appear on the NOTICE OF FEDERAL TAX LIEN.
- If the balance due has the name of a third party, i.e., accountant, attorney, etc., and a NOTICE OF FEDERAL TAX LIEN is being filed against a corporation,
- Then ensure that the address on the NOTICE OF FEDERAL TAX LIEN is the taxpayer's. A NOTICE OF FEDERAL TAX LIEN should never show the name and/or address of a third party or the names of corporate officers. When dealing with "c/o" be sure that the name and address on the NOTICE OF FEDERAL TAX LIEN is that of the taxpayer.
- Where a partnership is the taxpayer and employment taxes are involved, the NOTICE OF FEDERAL TAX LIEN should be prepared showing the words "a partnership" after the partnership name AND list the names of all the known general partners, e.g.,
Note: When a general partner is listed on the NOTICE OF FEDERAL TAX LIEN, a copy of L3172 must be provided. See IRM 18.104.22.168.4.2.
- XYZ, a partnership,
- A, a partner
- B, a partner
- C, a partner.
- File a NOTICE OF FEDERAL TAX LIEN in the jurisdiction where each general partner resides as well as where the partnership is located. When the place of filing changes, file a separate NOTICE OF FEDERAL TAX LIEN, i.e., file two NOTICE OF FEDERAL TAX LIENs if the partnership and one of the general partners lives in a different jurisdiction, etc. Provide multiple address information, if appropriate.
- The NOTICE OF FEDERAL TAX LIEN should be prepared showing the words "a corporation" after the corporate name, e.g., XYZ, Inc., a corporation.
- Revenue officers at the GS-9 level and above have the authority to sign Form 668(Y). The employee's name and employee identification number should be typed in the lower portion of the space for his/her signature and the title inserted in the appropriate block. The signature may be performed manually or by facsimile method. In the latter case, the employee whose signature appears on the form is responsible for its execution.
- Use the period when beginning date (07-01-92) rather than the period ending date (06-30-93) when preparing a NOTICE OF FEDERAL TAX LIEN for a Form 2290, Heavy Vehicle Use Tax Return. This is very important when there is more than one period for a specific TIN. The period beginnings must be used to separate each assessment to ensure that we receive the module satisfaction indicator from the masterfile when each module is satisfied.
Use of Trade Names
- The abbreviation "d/b/a/" for "doing business as" should be used only where an individual is actually doing business as a sole proprietor under a trade name, e.g., Edwin E. Kelly d/b/a Kelly's Garage. The abbreviation should never be used in a partnership situation.
- The same degree of care should be exercised when using the abbreviation "t/a" for "trading as." This is used where a corporate or partnership entity operates under a trade name other than the corporate or partnership name, e.g., Werk Hard, Inc., t/a The Diggers.
Taxpayers may change names after a NOTICE OF FEDERAL TAX LIEN has been filed. To avoid disputes over lien priority in subsequently acquired assets, file another NOTICE OF FEDERAL TAX LIEN reflecting the new name or alias.
Use this procedure when the taxpayer's name has been misspelled. See 235 of IRM 5.17, Legal Reference Guide for Revenue Officers for guidelines on errors that make a NOTICE OF FEDERAL TAX LIEN defective.
With the advent of the DIAL interface, "amended" or "corrected" NOTICE OF FEDERAL TAX LIENs should be rare. Amended or corrected NOTICE OF FEDERAL TAX LIENs could affect the priority of the original NOTICE OF FEDERAL TAX LIEN.
- Place the new name on the first line.
- Place the previous name on the second name line, preceded by either "aka" for "also known as" or "fka" for "formerly known as."
- Add the following statement to reference the original NOTICE OF FEDERAL TAX LIEN: "This Notice of Federal Tax Lien is filed to modify Notice of Federal Tax Lien number (serial number), recorded (date), in Book ____, Page ____, by reflecting a new or proper name."
Nonfiling of Notices of Lien
- A decision not to file a Notice of Federal Tax Lien will be supported by a history entry that clearly states the reasons why the filing of the NOTICE OF FEDERAL TAX LIEN will either hamper collection, is not proper due to doubt as to liability or when, in the revenue officer's judgment, information forthcoming, could lead to either of the above. Decisions to nonfile will be kept to these categories.
- The history must also contain a follow-up date by which the revenue officer will receive information needed or by which a NOTICE OF FEDERAL TAX LIEN will be filed.
- Managerial approval will not be required.
- The acceptance of other collateral to ensure payment such as a surety bond or mortgage for the forbearance by the area director from the filing of the Notice of Federal Tax Lien should be fully considered.
- A recommendation for nonfiling should be reevaluated upon receipt of another balance due or an additional assessment.
Special rules apply in some instances when filing a Notice of Federal Tax Lien.
Actual Notice or Knowledge of Lien Requirement
- IRC 6323(l) defines actual notice or knowledge of a Federal tax lien. The burden is on the Internal Revenue Service to show the existence of actual notice or knowledge whether such notice is material in determining the priority of a Federal tax lien as against a competing lien or interest.
- Section 1-201 of the Uniform Commercial Code is cited in part for your guidance for when a person has knowledge or received notice.
- A person has 'notice' of a fact whena(25)
- he has actual knowledge of it;(a)
- he has received a notice or notification of it;(b)
- from all the facts and circumstances known to him at the time in"(c) question he has reason to know that it exists."
- A person 'knows' or has 'knowledge' of a fact when he has actual knowledge of it.
- 'Discover' or 'learn' or a word or phrase of similar import refers to knowledge rather than to reason to know. The time and circumstances under which a notice or notification may cease to be effective are not determined by this subtitle.
- A person 'notifies' or 'gives' a notice or notification to another bya(26) taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it. A person 'receives' a notice or notification when
- it comes to his attention; (a)
- it is duly delivered at the place of business through which the contact"(b) was made or at any other place held out by him as the place for receipt of such communications."
Refiling Notice of Lien
- Refile the NOTICE OF FEDERAL TAX LIEN to maintain the continuity of priority established by the original filing when the collection period is extended.
- Consider refiling the NOTICE OF FEDERAL TAX LIEN if the statute date has been extended or suspended by any action within the required refiling period.
- If the form used for the original filing was earlier than 12/82,
- Then failure to file at the appropriate time does not affect the validity of the filing. However, it does nullify the effect of the prior filing.
- If Notices of Federal Tax Lien are filed on forms revised on 12/82 or later
- Then the form "self-releases" unless timely refiled. These forms are considered as both a NOTICE OF FEDERAL TAX LIEN and a release.
- Release of the NOTICE OF FEDERAL TAX LIEN is conclusive that the underlying, statutory FTL is extinguished. Follow procedures in Section 2 for revocation and reinstatement procedures.
- Potential Refile Reports will be worked monthly.
- Where applicable, ALS Units will route the appropriate information to the unit or employee responsible for the case for refiling determination.
- Technical Support will make refile determinations for CNC mandatory follow-up and ACS cases.
- Requests for refiles will be input through ALS.
Criteria for Refiling
- Before any NOTICE OF FEDERAL TAX LIEN is refiled, each assessment should be examined to determine that the statutory period for collection has been suspended or extended beyond the normal ten-year period beginning with the assessment date.
- The normal collection statute may be suspended or extended by:
- Execution of Form 900, Tax Collection Waiver.
- Offer in compromise.
- Assets of taxpayer in custody of a court in certain types of proceedings.
- Judgment for the United States.
- Absence of taxpayer from United States.
- Military deferments.
- Appropriate actions suspending or extending the collection statute.
- The extension of the statutory period for collection does not mean that a NOTICE OF FEDERAL TAX LIEN must be automatically refiled. Each case should be analyzed regarding present and future assets to which the refiled NOTICE OF FEDERAL TAX LIEN might attach. The present balance still due on the FTL would be another factor to be taken into consideration.
Required Refiling Period
- The time period for refiling NOTICE OF FEDERAL TAX LIEN have a starting and an ending date. Therefore, a refiled Notice of Federal Tax Lien is invalid if it is filed before the period for refiling as well as if it is filed after the period for refiling.
- The refiling period lasts for 1 year. For the first refiling, the period begins nine years and 30 days from the date of assessment and ends 10 years and 30 days from the date of assessment. For example, if the assessment date is 3/1/85, the first refiling period will be 3/31/94-3/31/95. For subsequent refilings, each period begins nine years after the end of the previous refiling period and ends 1 year later. An example using the first refiling period above is that the second refile period would be 3/31/04-3/31/05.
- As a general rule refiling should occur between July 1 and November 30 each year in order to allow sufficient time for processing a notice of change of address at the Service Center. For calculation of the required refiling period, see Exhibit 5.12.1-1.
- The following is an example of the "Required Refiling Period" - On March 1, 1985, an assessment of tax was made against A, a delinquent taxpayer, and a FTL for the amount of the assessment arose on that date. On July 1, 1985, a NOTICE OF FEDERAL TAX LIEN was properly filed. The NOTICE OF FEDERAL TAX LIEN filed on July 1, 1985, is effective up to and including March 31, 1995. The first required refiling period for the NOTICE OF FEDERAL TAX LIEN begins on April 1, 1994, and ends on March 31, 1995. A refiling of NOTICE OF FEDERAL TAX LIEN during that period will extend the effectiveness of the NOTICE OF FEDERAL TAX LIEN filed on July 1, 1985, up to and including March 31, 2005. The second required refiling period for the NOTICE OF FEDERAL TAX LIEN begins on April 1, 2004, and ends on March 31, 2005.
Place for Refiling
During the required refiling period, the NOTICE OF FEDERAL TAX LIEN is to be refiled:
- In all cases in every office in which a prior NOTICE OF FEDERAL TAX LIEN (including a refiled notice) was filed, and
- In the proper office in the State where a new residence is located, if, 90 days or more prior to the date of refiling, the Service receives written information concerning a change in the taxpayer's residence.
- If the new residence is located outside the United States
- Then refiling will be made in the District of Columbia. This refiling is extremely important in the case of personal property. If it is not accomplished as and when required, all other refilings are ineffective.
- If more than one written notice of change of address is received on or before the 90th day
- Then the most recent one will be used for purposes of refiling, whether or not the taxpayer resides there on the date of refiling.
Address Change Procedures Affecting Refiling
- Except as provided below, a notice of change of a taxpayer's residence will be effective only if it is received in writing from the taxpayer or his/her representative (Form 8822, Change of Address), relates to an unpaid tax liability of the taxpayer, and states the taxpayer's name and the address of the new residence.
- The notice of change of a taxpayer's residence will be effective if it is contained in a return or amended return of the same type of tax filed with the Internal Revenue Service by the taxpayer.
- The return or amended return must indicate that it is a change of address and correctly state the taxpayer's name, address of present residence and identification number required by IRC 6109.
- Other than the means specified above, no communication, either written or oral, will be considered as notice of a change of a taxpayer's residence.
Procedures and Responsibilities for Refiling
- Under normal refile circumstances, the Automated Lien System (ALS) should be used.
- At times, circumstances may exist that do not allow time for a refiled NOTICE OF FEDERAL TAX LIEN to be created through ALS. In these cases Form 668-F should be prepared as shown in Exhibit 5.12.1-2.
- ALS Units will print the Potential Refile Report and forward information on suspended cases to the appropriate function or employee for a refile determination. ACS and Form 53 mandatory follow-up determinations will be made by Technical Support.
- Prior to refiling, all balances must be updated to reflect the current unpaid balance of assessment. Satisfied modules should not appear on a refiled NOTICE OF FEDERAL TAX LIEN.
- If the refiled NOTICE OF FEDERAL TAX LIEN is prepared through ALS
- ALS will automatically not include any satisfied modules.
- If the entire assessed amount has been paid, but unassessed accrued amounts remain outstanding
- Then enter the total amount of the accruals as of the date the refiled NOTICE OF FEDERAL TAX LIEN is requested. These amounts should be shown in column (f). Line through the words Unpaid balance of Assessment and write in Outstanding Balance.
- If there is a diminimus amount due on the assessed balance and unassessed accruals
- Then enter the total amount owed plus accruals as of the date the refiled NOTICE OF FEDERAL TAX LIEN is requested. Line through the words Unpaid balance of Assessment and write in Outstanding Balance.
- If an original Notice of Federal Tax Lien lists more than one liability, and the assessment dates are different,
- Then the refiled NOTICE OF FEDERAL TAX LIEN should list only the period(s) which meet the criteria for refiling.
- If there are multiple assessments within the same period, and the refile periods are different
- Then care should be taken to only enter the balance for the assessment(s) being refiled. The Automated Lien System (ALS) will allow refiling of each specific assessment.
- If a Form 668(Y) was filed in a given jurisdiction, but because of a change of residence a NOTICE OF FEDERAL TAX LIEN is to be refiled during the refiling period in another jurisdiction,
- Then use Form 668-F for refiling, even though Form 668(Y) was never filed in that jurisdiction.
- ALS will allow NOTICE OF FEDERAL TAX LIENs to be refiled when the statute has expired against one person on a joint assessment.
Integrated Collection System (ICS) Notification
- Entity changes are systemically made when an address is updated on IDRS.
- All module balances in Status 26 are systemically uploaded from IDRS to ICS.
Release of Refiled Notice of Federal Tax Lien
- The Form 668-F, used to refile a NOTICE OF FEDERAL TAX LIEN, is not self-releasing. File a certificate of release when an extended statutory period for collection has expired.
- Filing Form 668(Z), will extinguish the NOTICE OF FEDERAL TAX LIEN and remove all notices from the record. Each refile, amended or corrective associated with an original NOTICE OF FEDERAL TAX LIEN must be identified on the certificate of release.
Original Notice of Lien After Refiling Period
Occasionally it is necessary to refile an original NOTICE OF FEDERAL TAX LIEN after the end of the first refiling period. The ALS system will prompt you for the CSED. When the NOTICE OF FEDERAL TAX LIEN document is printed, ALS will print "N/A" in the "last day for refiling" block.
Special Notice of Federal Tax Liens Filing Conditions (Overview)
- Revenue Officers may encounter situations where the taxpayer has transferred property and circumstances indicate actual or constructive fraud. Property may have been acquired in the name of another person or entity and the taxpayer controls the property to such an extent that the title holder is possessed of only "color of title." This may result in an administrative transferee assessment, suit to assert a transferee liability, or a suit to set aside a fraudulent conveyance.
- Persons determined to be an nominees or alter-egos are not entitled to collection due process appeal rights. You must issue L3177 and related publications after a lien has been filed. See IRM 22.214.171.124.4 for more information and Exhibit 5.12.3-12.
Transferee and Nominee Cases
- A transferee Notice of Federal Tax Lien (NOTICE OF FEDERAL TAX LIEN) may be used to subject property to the government's Federal Tax Lien (FTL) when property has been transferred or acquired in the name of a third party with the taxpayer's funds. Some state laws may not recognize transferee NOTICE OF FEDERAL TAX LIEN without the judicial process or it may not be possible to show that the taxpayer acquired the property.
- If the transferee NOTICE OF FEDERAL TAX LIEN is not possible, but facts show that the taxpayer treats the property as his or her own, a nominee NOTICE OF FEDERAL TAX LIEN may be filed. Area Counsel will advise which type of NOTICE OF FEDERAL TAX LIEN to file. Consider the following circumstances in developing your case:
- the taxpayer is paying maintenance expenses
- using the property as collateral for loans
- paying state and local taxes on the property.
- You may not file a nominee or transferee NOTICE OF FEDERAL TAX LIEN without the written approval of Area Counsel.
- Cases should be developed to withstand court challenge.
- Focus on the conveyance of the title.
- Requests should be for advice as to the need for a supplemental assessment, a new notice and demand and the language to be incorporated in the NOTICE OF FEDERAL TAX LIEN or levy.
- Prepare a report containing all of the facts of the case to accompany the request.
- Subsequent enforcement action is at the area's discretion once Area Counsel has approved application of the nominee or transferee theory in a case.
- In determining what additional enforcement action should be taken, consideration much given to the confusion in the chain of title and redemption rights by the taxpayer. These circumstances may depress the sale of the property.
- A judicial lien foreclosure or seizure followed by suit to foreclose the NOTICE OF FEDERAL TAX LIEN will generally bring a greater sale price particularly for real property.
- The administrative seizure and sale process may be used if prompt action is needed to protect the government's interest. If there is any doubt, request an opinion from Area Counsel.
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