Section 2. Notice of Lien Determinations

(1) This transmits revised IRM 5.12.2, Federal Tax Liens, Notice of Lien Determinations.

Background

An editorial revision of IRM 5.12.2.

Material Changes

(1) Editorial updates to references, links, example dates, and terminology throughout. Other formatting changes made to comply with current standards.

(2) 5.12.2.1. Expanded previous subsection to include internal controls and retitled to Program Scope and Objectives.

(3) 5.12.2.3.2. (1) Split previous table into two tables for 508 compliance.

Effect on Other Documents

Audience

Effective Date

Rocco A. Steco
Director, Collection Policy
Small Business/Self Employed Division

Program Scope and Objectives

1. Federal tax liens exist by operation of law. A Notice of Federal Tax Lien (NFTL) is a document filed with state and local jurisdictional recording offices to alert the public of the lien’s existence. The NFTL filing determination is the decision whether to file, defer the filing, or not file an NFTL.
2. Purpose : This IRM provides guidance for determining if and when a notice of federal tax lien (NFTL) should be filed.
3. Audience : This IRM is used by IRS personnel authorized to file an NFTL.
4. Policy Owner : Director, Collection Policy. Small Business/Sell-Employed Division (SBSE).
5. Program Owner : Collection Policy is the program office responsible for overseeing the lien program and the guidance for filing an NFTL.
6. Primary Stakeholders : SBSE Collection and Taxpayer Service (fka Wage & Investment) employees working balance due cases. Other functions that are affected by, or have input to, the procedures include Chief Counsel, Appeals, and the Taxpayer Advocate Service (TAS).
7. Program Goals : To protect the interests of the government when a federal tax debt exists by providing policy and procedural guidance to IRS personnel, on topics such as NFTL filing determinations, that is consistent with federal lien law.

Background

1. 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. " This federal tax lien, which is sometimes called the "statutory lien," is the basis for the government’s claim against the taxpayer’s property, including current and future rights to property.
2. While the federal tax lien protects the government’s interest, a Notice of Federal Tax Lien (NFTL) is needed for the federal tax lien to compete with certain classes of creditors (IRC 6323). The NFTL puts third parties on notice of the government’s outstanding lien against the taxpayer’s property and rights to property. It ensures the federal tax lien is addressed when property attached by the lien is sold or used as collateral. Unless the IRS files its NFTL first, the holder of a security interest, mechanic’s lienor, and judgment lien creditor will have priority over the federal tax lien. If the IRS files an NFTL, the tax lien will generally have priority to a taxpayer’s after-acquired property.

Authority

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

• 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

Roles and Responsibilities

1. The Director, Collection Policy is responsible for overseeing the policies and procedures regarding NFTLs.
2. Collection Policy, Enforcement is responsible for development and delivery of policies pertaining to the lien program.
3. Employees authorized to make NFTL filing determinations are responsible for ensuring procedures are properly followed.
4. Managers are responsible for ensuring employees are duly delegated to make NFTL filing determinations 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.

Program Management and Review

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

Program Controls

1. IRM 1.2.2.6.4, Delegation Order 5-4, Federal Tax Lien Certificates, stipulates the IRS positions authorized for lien activities.
2. 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 making NFTL determinations include, but are not limited to:

• Integrated Collection System (ICS)
• Account Management System (AMS)
• Automated Lien System (ALS)

Note:

User Guides for the systems should be consulted for specific instructions on their usage.

Terms/Definitions/Acronyms

1. ) The table below list key terms used in this section.

Caution:

The term "lien" is often used generically by external and internal customers when referring to the NFTL. Also, certain systems broadly use "lien" in their functional titles when referring to NFTL actions (e.g., "lien determination" ). It is important to be aware of the legal distinctions between the NFTL and statutory federal tax lien. See IRM 5.12.1, Lien Program Overview, and IRM 5.17.2, Federal Tax Liens.

Related Resources

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.

Note:

Form 668(Y)(c) is a computer-generated form through ALS. Manually prepared templates may show Form 668(Y).

Taxpayer Contact

1. The IRS is required to make reasonable efforts to contact the taxpayer before filing an NFTL. The efforts to contact the taxpayer are to advise that an NFTL may be filed if full payment is not made when requested. Issuance of the statutory assessment notice and the balance due notices sent during the collection process constitute reasonable efforts as each of these notices provide 10 or more days for the taxpayer to pay the liability in order to avoid additional penalty and interest charges.

Exception:

For modules manually accelerated (i.e. not systemically accelerated) directly into inventory thus by-passing some notice streams, issue Letter 728, Accounts Outstanding - Payment Request to allow the taxpayer the opportunity both to pay the liability and be made aware of the revenue officer assignment. The Letter 728 is not needed where a Form 3552, Prompt Assessment Billing Assembly has been issued for a jeopardy or prompt assessment.

1. Field contact (preferably). In situations where attempts at personal contact have been unsuccessful, the case history should be documented accordingly.
2. Telephone.
3. Mailing a notice or letter to the last known address (when appropriate). See IRM 5.11.1.3.2.1, Last Known Address, for "last known address" description.

1. Publication 594 (IRS Collection Process)
2. CP 501 (Reminder Notice - Balance Due)
3. CP 504 (Balance Due - Urgent Notice)
4. CP 523 (Installment Agreement Default Notice)
5. Letter 1058 (Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing)
6. ACS letter LT-39 (Reminder Notice)
7. ACS letter LT-11 (Final Notice of Intent to Levy and Your Notice of Your Right to Hearing)

Reminder:

When giving a deadline for a taxpayer response, take into consideration providing adequate time for that response. See also IRM 5.12.2.2(1), Taxpayer Contact , and IRM 5.1.10.9, Timely Follow-Ups .

Notice of Federal Tax Lien Filing Determination (Pre-filing Considerations)

1. The Notice of Federal Tax Lien (NFTL) filing determination is a process of deciding whether to file, defer, or not file an NFTL. If the decision is to file, then follow the filing criteria and thresholds found in IRM 5.12.2.6 , NFTL Filing Criteria. If the filing thresholds are not met, then the decision may need to be revisited once the thresholds are met.
2. IRC 6320 requires the IRS to ensure collection actions, including the decision to file an NFTL, balance the need for efficient collection of the tax with legitimate concerns of the taxpayer that actions be no more intrusive than necessary. To that end, review the factors contained in this IRM section and related subsections to reach the appropriate decision.
3. Filing determination considerations are listed below. It is not an all-inclusive list but it, as well as this IRM as a whole, provides guidance for the varying circumstances experienced when working with taxpayers.

1. Taxpayer compliance history.
2. Taxpayer qualification for a determination exception. See IRM 5.12.2.3.1 , Determination Requirement Exceptions.
3. Protection of the government's interest, including exigent circumstances; where the filing of an NFTL is necessary to protect the those interests. See IRM 5.12.1.2, Introduction to Liens, and IRM 5.17.2.3.1, Purpose and Effect of Filing Notice.
4. Taxpayer qualification for a determination that an NFTL filing will hamper collection. See IRM 5.12.2.4.3 (3), Defer Criteria.

Determination Requirement Exceptions

1. An NFTL filing determination is not required on Guaranteed/Streamlined Installment Agreements or In-Business Trust Fund Express Agreements.
2. If a revenue officer finds that an NFTL determination is needed for a Guaranteed/Streamlined Installment Agreement to protect the government's interest (such as in the case of an impending bankruptcy, or other exigent circumstances), follow the instructions in IRM 5.12.2.3.2 , Determination Requirements and IRM 5.12.2.6 , NFTL Filing Criteria. Also, an NFTL determination to file may be made on In-Business Trust Fund Agreements if necessary to protect the government's interest, such as:

• a BMF entity has defaulted on an installment agreement in the current year or prior calendar years, or
• a BMF entity meets the definition of a pyramiding trust fund taxpayer as described in IRM 5.7.8.4, Pyramiding Taxpayers.

Reminder:

Where an NFTL filing determination is not required, but a decision to file an NFTL has been made, document the justification in the case history including the manager's concurrence.

Affordable Care Act’s (ACA) Shared Responsibility Payment (SRP) Exception

1. Do not make an NFTL filing determination on Master File Tax Code (MFT) SRP/MFT 35 modules or the mirrored SRP/MFT 65 modules.

Note:

Determination Requirements

1. NFTL filing determinations must be made on all balance due cases including reactivated balance due cases within established time frames.

1. For taxpayers residing in the United States or its territories, follow the guidelines below:

1. The NFTL filing determination is due 10 calendar days from the initial attempted contact or initial actual contact date, whichever date is earlier.
2. The request for NFTL filing or the appropriate non-filing documentation must be prepared within 10 calendar days of initial attempted contact or initial actual contact, with the taxpayer or taxpayer representative.
3. If the revenue officer fails to make a timely initial or attempted contact, the NFTL determination is due 10 calendar days from the date the initial contact was actually due. The revenue officer will document the ICS history with the reason for making the NFTL filing determination prior to taxpayer contact.

1. The NFTL filing determination is due 30 calendar days from the initial attempted contact or initial actual contact date, whichever date is earlier.
2. The request for NFTL filing or the appropriate non-filing documentation must be prepared within 30 calendar days of initial attempted contact or initial actual contact.
3. The NFTL determination is due 30 calendar days from the date the initial contact was actually due if the revenue officer fails to make a timely initial or attempted contact.

Note:

See IRM 5.1.10.3, Initial Contact.

Reminder:

Group Manager approval is required when deferring an NFTL filing more than 120 days from initial or last taxpayer contact. See IRM 5.12.2.5.3(2)(d), NFTL Do-Not-File and Defer Determination Approvals.

• within 30 days of assignment to the ICS inventory as an IDRS Bal Due, or
• next calendared touch on the case.

Note:

If a pre-assessed module is created on ICS, the NFTL determination is due within thirty days of assessment.

Note:

• made full payment,
• qualified for an exception to the NFTL filing determination requirement ( IRM 5.12.2.3.1 , Determination Requirement Exceptions , and IRM 5.14.5, Streamlined, Guaranteed and In-Business Trust Fund Express Installment Agreements), or
• made other security arrangements (such as a bond) to satisfy the liability.

Note:

By issuing the L-1058 at the same time the NFTL is being filed, the taxpayer will receive CDP hearing rights for the NFTL and levy concurrently. If the taxpayer chooses to exercise their CDP rights, both the NFTL and levy issues can and should be addressed together in Appeals.

Determination Date Extension

1. The extension of the determination date for a NFTL filing is not the same as deferring the filing of the NFTL. The NFTL Determination Extension is used only when a determination cannot be made prior to the NFTL filing determination due date. Refer to IRM 5.1.10.3.1, Initial Contact Time Frames, for established time frames and IRM 1.4.50.10.2(10), Maintaining Targeted Inventories, for instances in which timely initial and follow-up contact time frames may be waived. Although not specifically mentioned in IRM 5.1.10.3.1 or IRM 1.4.50.10.2, other situations may warrant an NFTL filing determination extension. These situations are generally only applicable when the revenue officer has had no contact with the taxpayer. Potential situations may include:

• Inventory is assigned and the revenue officer is placed on a detail assignment.
• Inventory is assigned and the revenue officer is attending training.
• Inventory is reassigned or transferred to the revenue officer.
• The revenue officer is out due to illness or planned leave.

Example:

This is an example of when it is appropriate to extend the NFTL filing determination date: A revenue officer receives five new Bal Due cases on Monday 4/11/2022. The NFTL filing determination due date on ICS is 5/22/2022. The revenue officer is assigned a long term detail and is to report on Monday 4/25/2022 and will not return to their POD until Monday 6/13/2022. In this situation the NFTL filing determination date may be extended for a reasonable time frame allowing the RO to make an appropriate determination.

Reminder:

Make an appropriate history entry explaining why the initial contact was not timely.

Determination Criteria for "Do-Not-File" or Deferring the NFTL Filing

1. When considering the non-filing or deferring of an NFTL determine if the taxpayer is in filing and payment (Federal Tax Deposits, estimated tax payments, notice accounts, etc.) compliance. You should also consider the following:

1. The use of a collateral agreement (see IRM 5.6.1, Collateral Agreements and Security Type Collateral , for additional information).
2. Whether filing the NFTL then using a subordination of the NFTL for loan and financing situations is appropriate in lieu of not filing an NFTL (see IRM 5.12.10, Lien Related Certificates ).
3. Whether filing the NFTL then using a discharge of the property for removing specific property from the Federal Tax Lien is appropriate in lieu of not filing an NFTL (see IRM 5.12.10, Lien Related Certificates ).

Integrated Collection System (ICS) Documentation When Deferring the Filing of an NFTL or Choosing "Do Not File"

1. A decision to not file or defer the filing of an NFTL must be supported by a history entry that clearly states why filing an NFTL is not appropriate. An exception to this would be where a typically expected action is taken (e.g. the aggregate unpaid balance of assessments (UBA) is less than $10,000 or the balance to be reflected on the NFTL is less than $2500). Here the action taken is documented in the case history but the rationale does not need to be documented. In these circumstances the non-typical action's rationale would be explained in the case history.
2. When the decision to not file or defer the filing of an NFTL is made the revenue officer should ensure that the ICS NFTL filing determination field is properly updated on the case summary screen for each module. Update the NFTL filing determination in ICS by choosing:

• NFTL Filing Decision "Do Not File" when the decision is to not file a Notice of Federal Tax Lien, or
• NFTL Filing Decision "Defer" when the decision is to defer .

Do Not File (DNF) Criteria

1. Choose "Do Not File" when there is no reason to believe NFTL filing will be required in the future (pending full abatement, decedent with no estate, etc.).
2. In general , NFTLs should not be filed when:

1. The taxpayer is a defunct corporation or LLC (where the LLC is liable) whose assets have been previously liquidated.

Note:

A determination that the assets have been liquidated is not the same as an inability to find assets. The RO must have specific information indicating that a senior creditor has taken possession of all assets or all assets have been liquidated.

Example:

Specific information also includes: verifying the taxpayer is unable to locate (*see IRM 5.16.1.2.1, Unable to Locate and Unable to Contact); no assets have been located; and there is no indication that the taxpayer remains in business.

1. The taxpayer is a corporate entity or LLC (where the LLC is liable) that has gone through a liquidating bankruptcy or receivership regardless of dollar amount. Document the proceeding number in the case history.
2. When a non-paying officer has been assessed the Trust Fund Recovery Penalty (TFRP) and an adjustment to the TFRP is pending because the assessment has been paid by another officer.
3. There is an indication that the liability has been satisfied or that credits are available to satisfy the liability.
4. The taxpayer is in bankruptcy and the NFTL relates to liabilities incurred before the taxpayer filed for bankruptcy. Section 362(a) of the Bankruptcy Code imposes an automatic stay that prohibits all creditors from taking certain collection actions against debtors in bankruptcy. Consult Insolvency or Counsel to determine if an NFTL may be filed after the automatic stay ends.
5. There is genuine doubt as to the validity of the liability (for example, assessments made against victims of identity theft; see IRM 5.1.28, Identity Theft for Collection Employees, and IRM 5.12.11.2.1, Identity Theft and Liens. But the revenue officer must document the taxpayer’s justification and the method of resolution i.e., payment tracer, amended return, credit transfer etc.)

Exception:

There is no requirement to provide the taxpayer justification and method of resolution, if the taxpayer is unable to locate (see IRM 5.16.1.2.1, Unable to Locate and Unable to Contact ) and the RO is able to confirm that there is genuine doubt as to the liability assessed.

Reminder:

Defer Criteria

1. Use "Defer" when the decision to delay filing will be revisited (e.g., doubt as to liability pending taxpayer documentation or Form 911 submission).

Example:

When a taxpayer alleges Return Preparer Fraud, temporarily defer filing any new Notice(s) of Federal Tax Lien for those modules where the assessment may be a result of that fraud. See IRM 25.24.4.3, Suspension of Collection Action . It is important to recognize the potential for adverse impact on a taxpayer who is a victim of Return Preparer Fraud.

Example:

Taxpayer Advocate Service (TAS) cases may be initiated because of a potential notice of lien filing. TAS will notify the revenue officer when a Form 911 , Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order) , has been received and when it has been resolved. The revenue officer may also initiate a request for TAS assistance on behalf of the taxpayer. See IRM 5.12.1.5.2, Taxpayer Advocate Service .

1. A viable business, which factors account receivables, proposes a reasonable resolution with supporting documentation. See IRM 5.12.10.6.1.1, Subordination to Factoring Agreements, for more information on factoring.
2. A viable business, which operates on a floor plan, proposes a reasonable resolution with supporting documentation.

Example:

1. During a field visit on 5/01/2022 to a "Not for Profit" taxpayer you are asked not to file an NFTL and consider an in-business installment agreement. It is explained that if an NFTL is filed, state funding, which is the principal funding source for the entity, will be eliminated and the taxpayer will not be able to make installment payments. You agree to defer filing the NFTL and request appropriate documentation from the entity be sent to you by 05/12/2022 and you will consider the IA . On 05/09/2022 you receive the documents and are able to document a reasonable certainty that the NFTL would hamper collection of the liability and determine to defer the NFTL and place the taxpayer in a manually monitored IA. You inform the taxpayer of the IA and the condition that an NFTL will be filed if the taxpayer defaults on the installment agreement.
2. During a field visit to a taxpayer who is in the business of selling vacation time shares, you determine that the tax liability cannot be paid immediately and that in all likelihood an installment agreement may resolve the unpaid balance. However, in order to obtain the funds to make the installment payments and pay other operating expenses, the taxpayer must sell accounts receivable to a factor on a weekly basis. The factor also requires that the taxpayer gives a security interest in all current and future accounts receivable. Filing an NFTL in this case would end the factoring arrangement. You agree to defer the filing of the NFTL provided the taxpayer provides a copy of the contract, and remains cooperative and compliant . You inform the taxpayer that not complying with the provisions will result in your immediate filing of the NFTL.

1. A taxpayer or representative request for a filing deferral is reasonably determined to be an attempt to delay or avoid collection or ensure a bankruptcy petition filing before an NFTL (e.g. applying for an Installment Agreement (IA) but meeting the criteria found in IRM 5.14.3.3, Installment Agreement Requests Made to Delay Collection Action). History notations are required in these instances.
2. During a field visit, the taxpayer informs you that they are planning to purchase a new car or possibly lease one to replace their current vehicle and the filing of the NFTL will negatively affect their credit. They ask you to not file the NFTL. You ask if the car is essential to generate income to assist in the payment of the liability. The taxpayer informs you that the car is not essential for them to generate income. It would be appropriate to file an NFTL in this case.
3. During a field visit on 4/1/2022 a taxpayer informs you that he has applied for a loan to pay the liability and other operating expenses of the business and requests that you do not file an NFTL. He explains that the loan agreement has a clause which indicates any additional NFTL filings will cause the proposed agreement to be null and void. You agree to defer filing an NFTL if the taxpayer supplies you with back up documentation for the completed financial statement and loan agreement from his financial institution by 4/15/2022 and become current with all federal tax deposits (FTD). You also inform the taxpayer that if the documents are not received by the 15th, you will file the NFTL. You return to your office on Monday 4/4/2022 and document your case history with the reason why you deferred filing the NFTL and schedule a follow up date of 4/15/2022. On Monday 4/18/2022 you still have not received the documentation from the taxpayer or confirmation of the FTD payments. Since the taxpayer did not meet the specified deadline it is appropriate to file the Notice of Federal Tax Lien at this time without further contact with the taxpayer.
4. After returning to the office from a field visit the previous day you have determined to file an NFTL because the taxpayer did not make full payment and was not in compliance. The taxpayer calls you and asks that you not file the NFTL because she is selling her home to full pay the liability and avoid enforcement actions. You tell the taxpayer that the NFTL is going to be filed to protect the Government’s interest in the home. The taxpayer tells you that the sale will not go through because of the NFTL. You then tell the taxpayer that a Release of NFTL can be issued at the time full payment is made at the sale.
5. After your initial analysis of a BMF taxpayer you plan to visit in the field tomorrow, you determine that in addition to owing several 941 liabilities exceeding the notice filing threshold, there are several unfiled 941 returns, and FTDs have not been made for the current quarter. During your field visit the taxpayer informs you that they are currently under contract to sell their rights to a patent for a product they developed and the sale will more than pay the liability and the amount they estimate will be owed for the delinquent returns. The taxpayer tells you that part of the agreement for sale is that there can be no liens associated with the patent and asks that you do not file an NFTL prior to the sale in 45 days. You review the contract and confirm the taxpayer’s claim that sale of the patent is scheduled in 45 days. You tell the taxpayer that the lien exists because they owe taxes whether a notice of the lien's existence is filed or not but that you will defer the filing of the NFTL if they file all delinquent returns and pay all delinquent FTD within 15 days. This is 30 days prior to the sale. The taxpayer agrees that they can file the returns and make all FTD payments due and owing for the current quarter within the 15 days. On the 18th day you receive all delinquent returns but do not receive any of the promised FTD payments due and owing for the current quarter. A follow-up phone call to the taxpayer finds that they have gone on vacation. You made a timely NFTL filing determination within 10 days of your field call, deferring filing of the NFTL to correspond with the deadline agreed upon by the taxpayer. Since the taxpayer did not fulfill their agreed upon obligation, further deferral of the NFTL filing in this situation would not be appropriate.
6. During a field visit to the representative's office, she informs you that filing an NFTL will embarrass the taxpayer in their business community. A taxpayer's embarrassment alone is not a reason to defer filing the NFTL. In this case it would be appropriate to file the NFTL, unless the POA can document that the NFTL would hamper the payment of the liability.
7. During a field visit to an IMF taxpayer you request full payment of the $200,000 liability. The taxpayer tells you that he is negotiating a sale of his home (primary residence) but there is only $100,000 of equity so he can’t full pay even with the sale. He asks that you not file the NFTL because it will ruin the sale. You ask the taxpayer to supply you with the appropriate documents (these may vary by location) to confirm his statement. He says he cannot. In this situation it would be appropriate to file the NFTL and inform the taxpayer that he may request a discharge of the specific property when he is prepared to close the sale.