5.12.11. Lien Special Topics

(1) Federal tax liens exist by operation of law. The Internal Revenue Code (IRC 6321) states: 

"if any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property and rights to property..."

(2)  The federal tax lien, which is sometimes called the "statutory lien", is the basis for the government’s claim against the taxpayer’s property as it attaches all the taxpayer’s property and rights to property, both tangible and intangible, both currently in existence and acquired in the future. The lien exists until the liability for the amount assessed is satisfied or becomes unenforceable.

(3) While the federal tax lien protects the government’s interest, a Notice of Federal Tax Lien (NFTL) is filed for the federal tax lien to compete with certain classes of creditors (IRC 6323). The NFTL is a document filed with state and local jurisdictional recording offices to put the public on notice of the government’s outstanding lien against the taxpayer’s property.

(4) The NFTL can affect the taxpayer’s financial situation. An NFTL filed against a taxpayer who is a victim of identity theft or fraud or a taxpayer who lives in a federally-declared disaster area may create additional, undue burden for them.

(1) Authorities relative to federal tax liens are found in the following IRC and Treasury Regulations sections:

(2) The following Policy Statements and Delegation Orders regulate NFTL filings.

• IRM 1.2.1.6.2, Policy Statement 5-2, Collecting Principles

• IRM 1.2.1.6.13, Policy Statement 5-47, Notices of lien generally filed only after taxpayer is contacted in person, by telephone or by notice

• IRM 1.2.2.6.4, Delegation Order 5-4, Federal Tax Lien Certificates

(1) The Director, Collection Policy is responsible for overseeing the policies and procedures regarding NFTLs and related certificates.

(2) Collection Policy, Enforcement is responsible for development and delivery of policies pertaining to the lien program.

(3) Employees involved in lien processing are responsible for ensuring procedures are properly followed.

(4) Managers are responsible for ensuring employees are duly delegated to make decisions related to the lien program and that their actions are in accordance with policy and procedures.

(5) Other roles and responsibilities related to the lien program can be found in IRM 5.12.1.5, IRS Organizations Working Lien Issues, and its subsections.

(1) NFTL activity is reviewed and documented in numerous ways, including those shown on the following table.

(2) Management ensures compliance with policy and procedures through case reviews and operational reviews.

(1) IRM 1.2.2.6.4, Delegation Order 5-4, Federal Tax Lien Certificates, stipulates the IRS positions authorized for lien activities.

(2) Lien certificate requests worked by Field Collection are generally controlled and documented through the Integrated Collection System (ICS).

(3) Access to systems used in the NFTL process is controlled following standard access guidelines through the Business Entitlement Access Request System (BEARS, formerly Online 5081). The primary systems used when working lien related certificates include, but are not limited to:

• Automated Lien System (ALS)

• Integrated Data Retrieval System (IDRS)

• Integrated Collection System (ICS)

• Account Management System (AMS)

(4) Closed records associated with NFTL case work are retained in accordance with Document 12990, Records Control Schedules, the Internal Revenue Service Records Control Schedule (RCS 28), Tax Administration - Collection.

(1) The table below differentiates between key terms used in the lien program:

(2) The table below lists common acronyms used in the lien program and throughout this IRM.

(3) See Exhibit in IRM 5.12.1-2, Glossary of Common Acronyms , for a listing of other terms and acronyms used in the federal tax lien program.

(1) The form used to provide notice of the lien is Form 668(Y) (C), Notice of Federal Tax Lien. The form, when properly annotated, is also used for NFTL variations, including amended and special condition NFTLs.

(2) IRM 5.17.2, Legal Reference Guide for Revenue Officers, Federal Tax Liens, provides additional details about lien law such as the types of property subject to the federal tax lien and the priority of the federal tax lien versus other competing encumbrances.

(3) IRM 5.12.1, Lien Program Overview, provides additional information, websites, and job aids related to the lien program.

(4) Links to tools and references to assist IRS employees with lien processes may be found on the SBSE Collection page on IRS Source (https://irssource.web.irs.gov/SBSE/Pages/Collection.aspx). Similar information for taxpayers may be found on the Understanding a Federal Tax Lien page on IRS.gov (https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien).

(5) This IRM is for procedural use and does not provide detailed instruction on the use of any system. User Guides such as the ICS User Guide should be consulted, as needed.

(6) Taxpayer rights with regard to IRS processes are stipulated in IRC 7803(a)(3) and on the Taxpayer Bill of Rights intranet page (https://irssource.web.irs.gov/SitePages/TaxpayerBillOfRights.aspx). Specific rights regarding lien processes are referenced throughout this IRM, as needed.

(1) Notices of Federal Tax Lien may have been filed against taxpayers indicating there is a statutory lien against the victim(s) of identity theft. See IRM 5.12.2.4.2(3)(e), Do Not File (DNF) Criteria, for information on NFTL filing determinations in identity theft situations.

(2) The IRS has standards when requesting documentation and resolving cases involving identity theft. See IRM 5.1.28, Identity Theft for Collection Employees, and IRM 25.23.2, Identity Protection and Victim Assistance - General Case Processing, for those standards and instructions.

(3) Because of the variety of types of identity theft, there are differing solutions for Revenue Officers to follow. See the various sections of IRM 25.23, Identity Protection and Victim Assistance.

(4) Taxpayers may also be directed to IRS.gov for the following information:

1. Identity Theft Central (https://www.irs.gov/identity-theft-central)

2. IRS Identity Theft videos on YouTube (http://www.youtube.com/playlist?list=PL388D1AC3B539E4F1)

3. Pub 5027, Identity Theft Information for Taxpayers

4. Form 14039, Identity Theft Affidavit

(1) This section provides instructions when an NFTL has been filed and:

• you establish identity theft has occurred, and

• you have taken the appropriate case action steps to adjust the liability.

(2) When the NFTL will retain a tax liability for the taxpayer after the identity theft abatement(s), below are the potential resolutions that can be utilized if requested by the taxpayer:

• If only a portion of an existing module's liability is abated then amend the NFTL. (See IRM 5.1.28, Identity Theft for Collection Employees, and IRM 5.12.7.9.3 , Amending the NFTL Using the ALS Amend Option).

  Example: An NFTL is filed on the taxpayer's 2021 income tax showing an original assessment on a Transaction Code (TC) 150 along with an additional assessment (TC 290). The TC 290 additional assessment is subsequently found to have been the result of Identity Theft and is abated. The NFTL can be amended to remove the additional assessment.

• If an entire module's liability is abated but the NFTL contains other modules which will not be abated, a partial release may be requested under the IRC 6326 erroneous lien provisions. See IRM 5.12.3, Lien Release and Related Topics, for those instructions.

  Example: An NFTL has been filed for the taxpayer's 2018, 2019, and 2020 income tax liabilities. The 2020 liability is subsequently found to have been the result of Identity Theft and is abated in full. A partial erroneous lien release may be issued for the 2020 liability.

(3) If the requested abatement results in eliminating the tax liability for all the periods listed on an NFTL, request a release under IRC 6326 erroneous lien provisions. See IRM 5.12.3, Lien Release and Related Topics, for those instructions. Ensure that the release under IRC 6326 is requested before the liability is abated and before a systemic release is issued through the Automated Lien System (ALS).

(4) A withdrawal of the NFTL may be considered in lieu of an amended NFTL or erroneous lien release. (See IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien). The withdrawal recommendation must include not only the identity theft determination but any additional factors being considered for the withdrawal .

(5) Document the ICS and the Automated Lien System (ALS) case histories with the identity theft determination and the actions taken.

(1) NFTLs may be corrected prior to being mailed to the recording office. Immediately contact the Centralized Lien Operation (CLO) (https://serp.enterprise.irs.gov/databases/who-where.dr/centralized-lien-processing.html) via secure email, followed by a phone call to request the correction.

(2) Corrections must be made before 8:00 AM Eastern Time on Tuesday and Thursday. (CLO prints all documents twice weekly.)

(3) Document the ICS and ALS history with any changes requested.

(1) Centralized Lien Operation refers all cases regarding identity theft to the function currently controlling the case.

1. Status Code 26 - to the requesting field employee

2. Status Code 71 - to the appropriate OIC Unit

3. Status Code 72 where the last TC 520 on module is cc 70, 71, 73, 74, 75, 80 or 82 - to the appropriate Advisory office

   Note: TC 520 cc 71 - 74 are cases generally assigned to either Exam or Counsel.

   Note: TC 520 cc 76 and 77 are cases assigned to Appeals.

4. Status Code 72 where the last TC 520 on the module is cc 76 or 77 - to the appropriate Appeals office

5. Status Code 72 where the last TC 520 on module is cc 60-67, 81, 83-89 - to the Centralized Insolvency Office

6. Innocent Spouse - identified by MFT 31, TC 971, AC 104 - if appropriate, to the Innocent Spouse Unit

7. Cases no longer in inventory are referred to the Advisory office where the taxpayer resides.

(2) CLO documents the referral in the ALS history, including the date the referral is made, the status and name of the employee or office where the referral was forwarded.

(3) These are all the actions CLO is required to take. The referred function identified by CLO takes over and will follow the instructions in IRM 5.12.11.2.2, Recorded NFTLs, IRM 5.1.28, Identity Theft for Collection Employees, and/or any associated Interim Guidance.