A federal tax lien arises when the IRS assesses a tax liability, sends the taxpayer notice and demand for payment, and the taxpayer does not fully pay the debt within ten days of the notice and demand. This is called a ‘silent lien.’ A federal tax lien is effective as of the date of assessment and attaches to all the taxpayer’s property and rights to property, whether real or personal, including those acquired by the taxpayer after that date. This lien continues against the taxpayer’s property until the liability either has been fully paid or the time the IRS can legally collect (statute of limitations) has expired. The government may record a Notice of Federal Tax Lien (NFTL) to enforce the ‘silent lien’. Recording of the NFTL becomes public record. The government may enforce the lien by filing a civil suit against the taxpayer for the unpaid federal tax liabilities. There are a variety of lien enforcement suits available to protect the government’s interest.

To bring a suit, the IRS must refer a case to the Department of Justice (DOJ) and request the suit be filed. The IRS considers several factors when determining whether to initiate suit, including the feasibility of administrative collection devices, the statute of limitations, and the potential economic value of the suit. Once the DOJ receives the IRS referral, it can initiate a suit by filing a complaint in the appropriate district court. In addition to suits to enforce a lien, the DOJ may file other types of suits such as a suit requesting the appointment of a court ordered receiver, or a suit requesting an injunction.

IRS refers a case to the Department of Justice to initiate a civil suit to reduce liabilities or assessments to judgement. This extends the time that the IRS can collect from a taxpayer’s assets beyond the normal collection period. A suit to reduce an assessment to judgement is one of the more common types of suits filed on behalf of the IRS. It is often paired with a suit to foreclose a tax lien.

Once the Department of Justice brings a lien enforcement suit, the court may foreclose the lien on property in which the taxpayer has an interest to convert it to cash and to apply the proceeds to the taxpayer’s liability. A suit to foreclose a lien is commonly filed when the IRS would like the court to resolve the issues regarding ownership of an asset. In these cases, a suit is a better alternative for the IRS than an administrative seizure. The court will sell the property with a clear title to the new buyer.

IRS refers a case to the Department of Justice to bring suit against a person who was served a levy and did not surrender the property to the IRS that was listed in the levy.  Any person failing or refusing to surrender property subject to levy can be held personally liable for the value of the property in which the levy attached.  Additionally, if failure or refusal to surrender the property was not due to reasonable cause, the person can receive a penalty of 50% of the amount value of the property, plus penalties and interest.  A suit to enforce a levy is generally brought against a third party, not against the taxpayer (e.g., an employer fails to honor a levy served to reach a taxpayer’s wages).