Section 16.9 How the Tax Lien Arises

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

A. (§16.9) How the Tax Lien Arises

Tax liens arise automatically by operation of law upon the happening of three events:

The Internal Revenue Service (IRS) makes a proper assessment of the tax. The IRS notifies the taxpayer of the tax assessment and demands payment of the delinquent tax liability. The taxpayer fails to pay the delinquent tax liability within ten days after the notice and demand is sent.

I.R.C. §§ 6303(a), 6321, and 6331(a); Drye v. United States, 528 U.S. 49, 55 (1999). The IRS can assess a tax in three ways. The first method of assessment, and by far the easiest, is when taxpayers admit on their tax returns that they owe a tax liability but fail to pay that tax liability with the return. In this case, the IRS’s regional service center only needs to record the tax liability in its office to have a valid assessment of the tax. Section 6203; Niemela v. United States, 995 F.2d 1061 (1^st Cir. 1993) (unpublished opinion).

The second way for the IRS to assess an income tax liability is to audit a taxpayer. After an audit, if the IRS believes that additional tax is due, it will request that the taxpayer admit the tax deficiency. If the taxpayer does so, the delinquency is recorded in the office of the regional service center and, at that time, a valid assessment of the tax liability occurs. Id.; see also Treas. Reg. § 301.6203-1.

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