As you may be aware, a federal tax lien arises upon 1) an assessment of tax; 2) IRS delivering notice of the assessment and demanding payment; and 3) the assessment remaining unpaid ten days after demand. While valid against the taxpayer and certain other parties without any further action, that unperfected or "secret" lien is not valid against a purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor, unless IRS files a Notice of Federal Tax Lien ("NFTL") to give constructive notice of the federal tax lien and to obtain priority over these interests.

But IRS does not file a NFTL in every case. Before filing a lien, the IRS usually attempts to contact the taxpayer to explain the effect that the filing will have on the taxpayer's business operations or credit rating, and afford the taxpayer an opportunity to pay the outstanding liability.

Generally, the IRS will file a NFTL in the following situations:

· Accounts with an aggregate unpaid balance of less than $5,000, but filing will promote payment;

· Accounts with an aggregate unpaid balance of any amount for an entity and the entity are not adhering to compliance requirements such as filing returns or making federal tax deposits;

· Accounts with an aggregate unpaid balance of $5,000 or more (In 2011, to better aid financially struggling taxpayers, IRS announced that it increased the threshold that generally triggers a lien filing from $5,000 to $10,000);

· Installment agreement cases not meeting the streamlined, guaranteed, or in-business trust fund criteria;

· A case involving both assessed and un-assessed periods that have not yet been classified as "currently not collectible";

· Taxpayer has property that is exempt for purposes of Federal bankruptcy or state insolvency proceedings; and

· The taxpayer lives outside the U.S. and has known assets.

Generally, However, IRS will not file a NFTL in the following situations:

· When it may be more beneficial to use a collateral agreement, subordinate the lien (for loan financing situations), or discharge the property (i.e., remove a specific piece of property);

· When the taxpayer is a defunct corporation or LLC whose assets have previously been liquidated;

· When a potentially responsible person has not paid the Section 6672 penalty but the assessment has already been paid by one or more of his fellow officers and an adjustment is pending;

· When the taxpayer is dead and there are no assets in the estate;

· When the taxpayer resides abroad and there are no known assets in the United States;

· When the taxpayer has filed bankruptcy and the NFTL relates to pre-bankruptcy liabilities; or

· When there is an indication that the liability has been paid or is not correct/valid.

Of course, IRS can defer or decide entirely not to file an NFTL when the taxpayer can prove that to file would hamper collection or can provide collateral to ensure payment (e.g., a surety bond).

Dealing with debt collectors is never easy, should the need arise, please consider allowing the trusted professionals at AVZ to help you. 

Very truly yours,