Posted On August 17, 2021
Property to Which a Tax Lien Attaches

Property to Which a Tax Lien Attaches

A lien attaches to all of a taxpayer’s property, including his or her rights to property. In this case, property refers to tangible and intangible items and “rights” that a taxpayer may own. The courts have simplified this broad concept to include real property, personal property, future interests, executory contracts, and contingent interests.

Real Property

Real property includes any asset that is permanently fixed to a specific location. Land, buildings, mineral rights, and crops are examples of real property.

Personal Property

Personal property comprises movable assets – they aren’t fixed to one specific location permanently. Tangible assets like boats, automobiles, and goods and intangible assets like bank accounts, partnership interests, and wages and benefits are perfect examples of personal property that are subject to a lien.

Future Interests

A lien attaches to a taxpayer’s right to property even if it may be postponed.

Executory Contracts

These contracts are contractual agreements that have been reached but are yet to be fully performed. They include a car lease, rental agreement, and development contract.

Contingent Interests

Contingent interests constitute those interests that a person will get only if specific events happen. Trusts and wills are, for instance, contingent on attaining a specific age or surviving someone else.

How Does a Lien Arise?

A federal tax lien ensues when a taxpayer with outstanding federal tax fails to settle the tax debt after the Internal Revenue Service (IRS) demands payment. The lien attaches from the day that the IRS assesses the tax.

If the taxpayer fails to settle the assessed tax, the lien is considered to apply retroactively to the assessment date. The lien attaches even without the IRS filing a Notice of Federal Tax Lien (NFTL). An NFTL filing, however, gives the IRS precedence over other creditors.

A tax law attorney can negotiate with the IRS for a reasonable compromise on the taxpayer’s behalf, making sure the taxpayer adheres to all the relevant lien requirements. The attorney can help the taxpayer develop a repayment plan that will convince the IRS to release the lien.

What is the Timeline of a Lien?

The lien remains enforceable until the taxpayer fulfills the assessed tax liability or it becomes unenforceable due to a lapse of time. The IRS usually has a ten-year collection period after the assessment. The IRS has the power to foreclose the property of a taxpayer who refuses or fails to pay a tax liability.