A Federal Tax Lien (“FTL”) facilitates the collection of delinquent taxes. A FTL is an encumbrance, on the property, of the delinquent taxpayer, providing security for payment of the tax delinquency.
After notice and demand for payment, if a taxpayer fails to pay a tax assessment, then the amount of the tax assessment, including any interest or penalties, becomes a FTL and automatically attaches to all property and rights to property (real, personal, tangible, intangible, present, and future) belonging to such taxpayer.
The IRS will typically file a Notice of Federal Tax Lien (“NFTL”) to put the world on notice of the delinquent taxes and thus establish the priority of the FTL in regard to other security interests. A NFTL can adversely affect a taxpayer’s credit rating as well as impede any effort, by such taxpayer, to sell his or her property. For real property and for personal property, the NFTL must be filed, in the office, within the state, county, or other governmental subdivision, as designated by state law, in which the property, subject to the FTL, is physically located. Personal property, either tangible or intangible, is deemed to be located in the state where the taxpayer resides at the time the NFTL is filed.
Internal Revenue Code §6321
Internal Revenue Code §6323
Treasury Regulation §301.6323(f)-1(a)
Treasury Regulation §301.6323(f)-1(b)