Often I find that clients misunderstand a tax lien, and often a tax lien is confused with a tax levy. A levy is an actual taking of property and tax lien, like other liens can be viewed as a claim against property or an encumbrance on property. I’ve decided to draft a series of articles regarding tax liens so that I can go into depth regarding the issues and related matters. The article below will discuss the general tax lien and hopefully provide background information for further articles to come.
The law would generally define a lien as a charge or an encumbrance that a person or a business has on the property of another as security for a debt or other obligation. In a sense, a lien is a security interest and protects one parties interest in the assets of another party. The owner of the property can continue to use the property and maintains ownership of the property but the lien shows that there is some kind of charge or claim against the property, and that the “owner” does not own the property outright so to speak.
You can break down liens into three categories known as statutory liens, common law liens and consensual liens. A tax lien would be considered a statutory lien because a statute allows for the filing of a tax lien. A tax lien is allowed per the Internal Revenue Code. The general tax lien being discussed has also been referred to as the assessment lien and is a very broad lien provided for in Internal Revenue Code Section 6321. This general tax lien encompasses all of a taxpayer’s property or a taxpayer’s right to property to secure the government’s interest in the tax debt owed by the taxpayer. Thus, the lien is a security interest to secure the government against the debt of the taxpayer.
In addition to this general tax lien, the Internal Revenue Service has two other special liens. These “special” liens apply to estate and gift taxes that accrue at the death of an individual or upon the date of a gift. Internal Revenue Code Section 6324 allows for these estate and gift tax liens. Internal Revenue Code Section 6324A, 6324B and 2057 provides for special estate tax liens applying to circumstances involving a closely held business, farm or qualified family owned business.
In short, the IRS has been given the ability to file a tax lien per a statute, and thus the name statutory lien. The IRS will file this tax lien to protect the government’s interest (a security interest) when a taxpayer owes a tax debt to the government that has not been paid. This statutory lien is broad and will “attach” to all of the taxpayer’s assets thus asserting the government’s claim against the property.
If you have questions regarding IRS tax liens or other tax matters, speak with a Denver tax attorney at The McGuire Law Firm. A tax attorney can assist you with tax matters before the IRS, individual & business tax questions and analyzing the tax implications of certain transactions and situations.
