Introduction

Once an assessment has been made against the taxpayer, the IRS is required to give notice and demand for payment within 60 days.

If the taxpayer thereafter fails to pay, a federal tax lien arises and attaches to (i.e., acts as an encumbrance on) all property and property rights either owned on or acquired after the date of assessment.

Because the lien is merely an encumbrance, it does not result in the actual transfer of the taxpayer’s property to the IRS. Rather, the IRS must levy upon the taxpayer’s property or property rights (or, alternatively, file suit in court to enforce the lien) before the transfer to the IRS is deemed to occur.

What is a Tax Lien or Notice of Federal Tax Lien?

When the IRS files a notice of federal tax lien, you will receive IRS letter 3172.

You will also receive a copy of 668Y, which is a copy of the actual notice of federal tax lien.

A tax lien is a legal claim to your assets that the IRS issues when you owe back taxes. Once the IRS files a notice of federal tax lien, this lien attaches itself to just about all of your assets. A tax lien gives the IRS the right this property, and if you try to sell any of the property, the IRS has the authority to take the money, or it’s share to pay your liability owed plus interest and penalties. A tax lien is similar to when you buy a home with a mortgage — the bank has a lien on your property, and if you don’t repay your loan, the bank has a right to take your home.