Section 6321 of the Internal Revenue Code (IRC) grants the Internal Revenue Service (IRS) the ability to issue liens on a taxpayer's property. Overall, this provision is very broad, covering almost any delinquent taxes, but there are subtleties in the law that can profoundly impact taxpayers' liability. Reviewing just a few of these should drive home an essential point:

Taxpayers with serious debt should consider getting professional tax counsel to help protect their property and resolve their debts. Because the revenue code is complex, and crucial distinctions in the law may be lost on most taxpayers. 

More than Real or Personal Property

The IRS' purpose for a levy is to sell a taxpayer's property, then use the proceeds to settle an outstanding tax debt. Because of that, people understand that tax liens apply to real and personal property. But they frequently fail to understand that it has much broader implications. For example, the IRS can attach a lien to future interests, such as the right to receive installment payments. It can even apply to certain types of contracts, where a taxpayer is paid only after fulfilling an obligation under the contract. Whenever they did so, the money would go to the IRS.

The Date of a Lien

A Notice of Federal Tax Lien (NFTL) is not required under section 6321, which is why these liens are sometimes called the “secret lien” because the federal government never needs to record the lien.

But if the IRS wants to establish its priority over other creditors, then a different section of the code requires that the IRS file the NFTL. And while the NFTL sets a date for priority, the IRS can actually date the lien back to when a taxpayer refused or forgot to pay the assessment.

Locations for Filing a Lien Can Be Determinative

Both federal and state law play a role in deciding where the IRS must file an NFTL. For example, states can designate separate offices for real or personal property liens. In most states, real property liens should be recorded in the county where the property is located, while personal property liens should be recorded where the debtor lives. And liens on property owned by a corporation should be filed where the corporation has its principal place of business. 

An incorrectly filed NFTL can have significant consequences: If the IRS files the NFTL in the wrong office, the IRS can lose its priority over other creditors.

We've just scratched the surface, but it's easy to see that tax law is highly technical. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.