A federal tax lien is the IRS’s legal claim to property as security or payment for a tax debt. The claim arises “automatically” under I.R.C. § 6321 and attaches to every interest in property and rights owned by a taxpayer without regard to their location.1 This statutory lien is often referred to as a “secret lien” because it arises even if not publicly recorded.2 The lien also attaches to after-acquired property other than property acquired after a bankruptcy in which taxes were discharged. Federal tax liens even attach to property exempt from seizure under state law.3 Exemption from levy under federal law does not bar a lien on the exempt property.4 The IRS may seek to enforce the lien against exempt property by a foreclosure lawsuit under I.R.C. § 7403, but this is unlikely.
If a taxpayer does not pay a bill, the IRS will generally send a Notice of Federal Tax Lien which demands payment within 10 days.5 The Notice will threaten the filing of a tax lien in the public records office if the bill is not paid.6 A tax lien is not self-enforcing. To enforce a tax lien, the IRS must administratively levy the property or income or bring a foreclosure suit under I.R.C. § 7403.
- 1Drye v. United States, 528 U.S. 49 (1999).
- 2IRS Chief Counsel Memorandum, No. 200634012 (June 23, 2006).
- 3Drye, 528 U.S. 49; Medaris v. United States, 884 F.2d 832 (5th Cir. 1989).
- 4Matter of Sills, 82 F.3d 111 (5th Cir. 1990).
- 5IRS personnel are directed to file liens for tax debts that are $10,000 or more and may file for lesser debts.
- 6Note that the filing of a lien on a taxpayer’s home may trigger a technical default if the mortgage has a “‘no lien” clause.