8.3 The Federal Tax Lien
Library | Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.) |
8.3 THE FEDERAL TAX LIEN
8.301 In General. With the exception of the special estate tax or gift tax lien described in paragraph 8.14 below, the federal tax lien discussed in this chapter is the lien created in I.R.C. § 6321. This statutory lien
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originates in a simple way and has a very broad reach—it attaches to all of a taxpayer's property and rights to property then in existence or acquired afterwards during the life of the lien. Because the lien is broad in scope and arises automatically when tax liabilities are not paid, it would create substantial commercial uncertainty if there were no possibility of defeating it. Accordingly, the statute addresses mechanisms for defeating the lien in detail. The original statutory framework of the 1966 Federal Tax Lien Act has remained remarkably unchanged since its passage, but a number of Supreme Court cases address and interpret the meaning of the statute.
The federal tax lien arises with the occurrence of three events: (i) assessment of tax, (ii) demand for payment of the assessed tax, and (iii) failure to pay the tax within 10 days after demand. Once the lien has arisen, it relates back to the moment of assessment and attaches to all property and rights to property owned by the debtor. Significantly, no one except the IRS is likely to know that the lien exists. Even the debtor will probably not know about it. Because of its unknown character, this lien is sometimes referred to as a "secret lien." It is also sometimes called the assessment lien, because it arises at the time of assessment.
8.302 Assessment. Assessments result from the permission to assess given by taxpayers when they calculate their tax liability and send in their tax returns listing a specified amount of tax due. Some taxes are assessed after the return is filed, when the IRS audits a taxpayer's return and determines that additional tax is due. The taxes determined by an audit can be assessed either through the consent of the taxpayer or, if no consent to assess is given, through a statutory process that includes giving the taxpayer the opportunity to litigate the correctness of the liability. Once the IRS has obtained the statutory authority to assess a tax liability, it does so by recording on an assessment form the name of the taxpayer, the amount of the tax, the type of tax, and the period of taxation. When the form has been executed by an assessment officer, the assessment is complete. Historically, the document reviewed and signed by the assessment officer has been Form 23C (Assessment Certificate—Summary Record of Assessments.) The manually prepared Form 23C has been replaced by a computer generated report known as the RACS Report 006 (Revenue Recording and Control System.)
Most assessed liabilities have already been satisfied either through withholding, estimated payments, or...
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- 8.1 Introduction
- 8.2 The Federal Insolvency Statute
- 8.3 The Federal Tax Lien
- 8.4 Property to Which the Federal Tax Lien Attaches
- 8.5 Filing of the Federal Tax Lien
- 8.6 Priority of the Federal Tax Lien
- 8.7 Parties Defeating the Unfiled Federal Tax Lien
- 8.8 Parties Defeating the Filed Federal Tax Lien
- 8.9 Purchase Money Security Interests
- 8.10 State Tax Liens
- 8.11 Future Advances
- 8.12 Requesting Irs to Remove a Federal Tax Lien
- 8.13 Proceedings to Remove a Federal Tax Lien
- 8.14 Estate and Gift Tax Liens
- Appendix 8-1 Notice of Federal Tax Lien
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