IRS Liens

Federal law is very broad in providing that taxes are a lien on all property rights belonging to the taxpayer. Section 6321 of the Internal Revenue Code creates a lien on all assets of any person who fails to pay any tax due to the United States of America. The lien attaches to all assets of the taxpayer, whether real, personal or intangible when a Notice of Lien is placed in the records of the county where the property is located.

Homestead Property. Federal tax liens do attach to homestead property. Courts have held that the homestead nature of the taxpayer's property does not prevent the Federal tax lien from attaching. In re McFayden, 216 B.R. 1006 (Bkrtcy. M.D. Fla. 1998).

Entireties Property. Federal tax liens against both the husband and wife attach to the property owned by them as tenancy by the entirety. However, recent case law has held that a Federal tax lien filed against only one spouse does not attach to property held by husband and wife in a tenancy by the entirety. Talbot v. United States, 850 F. Supp. 969 (DC WY 1994).

Priority vs. Purchase Money Mortgage. The Internal Revenue Service has acknowledged that a purchase money mortgage (where the proceeds of the loan are used by the taxpayer to acquire an interest in property) is protected from and has priority over a previously recorded Notice of Federal Tax Lien filed against the mortgagor. (Reference: Revenue Ruling 68-57, 1968-1C.B. 553).

Duration of Federal Tax Liens. Beginning November 5, 1990, a federal tax lien is a lien for a period of 10 years from the date of assessment. The date of assessment is the date for determining the life of the lien, not the date the lien is recorded. The IRS has an additional 30 days after the 10 year period within which to refile the Notice of Lien. If refiled, the lien is effective for an additional 10 years. The 10 year and 30 day rule applies to all tax liens filed after November 5, 1990 and any liens which had not expired before November 5, 1990. In effect, this means that any lien filed on or after October 1, 1984 has a duration of 10 years and 30 days from the date of assessment shown on the Notice of Federal Tax Lien. Prior to November 5, 1990, a federal tax lien became unenforceable 6 years after the date of assessment. If refiled, the lien was extended for an additional 6 years.

Right of Redemption in Foreclosure Action. When the United States is joined in a mortgage foreclosure action and properly served as a defendant and junior lien holder by virtue of a federal tax lien, it has a 120 day right of redemption pursuant to 28 U.S.C., Section 2410(c). The 120 day right of redemption begins to run from the recording of the Clerk's Certificate of Title.




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