What is a Federal (IRS) Tax Lien?
The Collection Division of the IRS deploys a wide array of tools for enacting what are known in legal circles as enforced collections. An enforced collection is an action which goes beyond the conventional, over-the-phone, send threatening letters three times in a month, and other types of methods for rhetorically coercing debtors to pay up. An enforced collection is an action by a creditor which either seizes property or compromises the owner’s ability to sell or borrow against, in order to force the owner to pay the debt owed.
Tax liens assigned by the United States government arise out of a tax debt owed by a taxpayer or taxpaying entity to the federal government. The tax lien is what the Internal Revenue Service applies in its efforts to settle tax debts and produce final resolution through enforced collection action. The lien applied by the Internal Revenue Service on behalf of the United States government bears consequences for taxpayers under its influence, once it is “attached” in order initiate collection of the outstanding tax debt.
- Taxpayers are advised of their rights relative to these consequences and
- How an IRS enforced lien arises or comes into effect on the taxpayer’s case
- Types of property targeted for enforced collection of a tax debt by lien assignments
- How long a lien can be in effect
- How competing interests in all matters pertaining to the affected property get resolved and in what order of priority
- Terms the IRS considers before it will drop or re-prioritize its lien
Liens are claims on property against the property owner. Such claims are made conventionally with one party asserting rights to access some or all of the inherent value of that property until the owner of the property addresses the claimant’s demands for restitution in the settling of an outstanding financial issue between the two parties. The lien gives the creditor legal standing in any matters involving the transfer of title of the property through any means by the owner with an outside party. The lien allows the creditor’s standing to be transferred with the property to any new owner in that the new owner becomes liable for the outstanding resolution of the debt, which is the usual reason for a lien to arise in the first place.
A tax lien issued by the Internal Revenue Service on behalf of the United States government is a claim made on behalf of the government against the taxpayer for outstanding, unpaid taxes. Federal tax liens remain in effect until the debt is paid or enforcement statutes expire.
The Internal Revenue Service files tax liens on behalf of the federal government against property owned by a specific party who is indebted on account of unpaid tax obligations. Given that said party resides in a given state within the 50 United States it is by state law that the party’s ownership interest in the property is to be established. State law trumps federal law on the matter of ownership determinations of real property. Once established, in the matter of tax liens and enforced collections, the federal tax code takes precedent.
Other precedence issues involve the rights of outside parties to make claims against the same property as the United States government will by its tax liens. The United States government, in order to have prior say over the settlement of the tax debt before other creditors making claims against the property, must file its lien before any other outside party. If the United States government, through the Internal Revenue Service acting on its behalf, files the lien first and ahead of all other parties, it is the government’s claim which is settled first in the event of sale of the targeted asset.
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