An IRS lien is the government’s claim against a taxpayer’s property for unpaid tax debt. This can occur for both individuals and businesses. A lien can be attached against all assets of the taxpayer, both current and in the future. For businesses, a lien would likely be enforced against almost any asset they have, including real property, vehicles, equipment, and accounts receivable.
It is vital to understand how tax liens work in Washington DC, which is why you should reach out to an experienced lien resolution attorney for help in this scenario.
For the IRS to file a lien against someone, there must be an assessment of their tax liability, which for most people means just filing an income tax return. For others, the IRS may file a return on their behalf or there may be an audit which leads to a tax assessment. Next, the IRS would need to send a notice and demand letter, which gives the taxpayer notice of the tax bill and demands proper payment. If the taxpayer fails to make full payments, the IRS may file a tax lien. The notification is not merely a warning – the lien is placed within 10 days.
The federal tax lien arises automatically when they send a notice and demand letter after a taxpayer failed to pay the account in full. This is commonly referred to as a secret lien because only the IRS and the taxpayer know that a balance is due. The next step would be the IRS filing a notice of federal tax lien in the county courthouse for the taxpayer. This puts the public on notice. Once a notice of federal tax lien is filed the IRS will send a Notice of Your Right to a Collection Due Process Hearing.
When the IRS files a lien against a taxpayer, they have a legal claim to all of that taxpayer’s assets. This primarily includes real estate, personal property, and financial assets that exist from the time of the tax assessment.
The IRS has a legal claim to property that the taxpayer has acquired after the lien was filed, and their right to that property starts the moment the assessment is made. This is even before the public lien is filed in the courthouse.
Resolving a tax lien as soon as possible prevents a bad situation from getting even worse. Resolution would allow the taxpayer to once again borrow against their home, or to sell it and avoid more interest and penalties to the IRS. If the IRS has filed tax liens, they may also be levying that taxpayer’s assets as well. Depending on the specific circumstances, the IRS does not have to have a lien filed before the levy. Although they are similar, a lien is the government’s claim against the taxpayer’s property for unpaid tax debt, while a tax levy is the taking of that property to pay a tax debt.
The simplest way to resolve a lien is to pay the tax owed, while a more long-term option is to wait for the collection statute of limitations to expire. Another option would be for the IRS to discharge a property from the tax lien, subordination of the tax lien, or withdrawal of the tax lien. A DC attorney could further explain how these lien resolutions options work.
The IRS has the right to redeem a real property that is sold through foreclosure actions initiated by a third party who has a priority interest over the federal tax liens. This is according to both judicial foreclosures under 28 USC 2410 (c) as well as non-judicial foreclosures through Internal Revenue Code § 7425. There is a 120-day redemption period. Publication 487 covers requesting the United States to release its right to redeem property secured by a federal tax lien. In essence: the IRS has 120 days after the foreclosure to redeem that lien, otherwise the lien would not apply to that property.
The District of Columbia has the power to place a lien on taxpayers’ property for taxes that originate from the District of Columbia.
DC has a 10-year collection in the statute of limitations according to D.C. Code § 47-4302. While the period of the lien does not have a specific expiration date, the collection period for the underlying tax debt is 10 years.