Discharge of IRS Tax Liens In Connection With A Florida Short Sale Part I

The IRS uses powerful methods to collect unpaid taxes. At the heart of the IRS collection procedures is the federal tax lien which arises automatically after the conditions precedent to the creation of the tax lien have been satisfied, i.e. - assessment of tax liability, demand for payment, and failure to pay.

Once these requirements have been met, the tax lien is automatically in place, under Internal Revenue Code (IRC) §6303(a), and enforceable against the taxpayer, according to IRC §6321. In essence, once a person fails or neglects to pay any federal tax after the IRS's demand, then the amount of the tax liability automatically becomes a lien in favor of the United States from the time of assessment.

IRC § 6321 also asserts that the lien automatically attaches to property and rights to property, whether real or personal. The tax lien attaches not only to all property and rights to property belonging to such person at the time during the period of the lien but also to any property or rights to property acquired after the lien arises. For example, in Florida the bankruptcy court has held that the United States had a valid tax lien against the funds of a Chapter 7 debtor's bank accounts because the IRS had assessed the tax, the debtor had refused to pay the taxes, and therefore the tax lien existed against all properties, including the bank accounts which were opened after the lien arises. In re Morgan, 213 Bankr. 609 (Bankr. MD Fla. 1997).

A federal tax lien can be perfected by filing a notice with states and any other creditors explaining that the IRS is first in line to receive payment as a result of back taxes. In addition, the tax lien is perfected against certain third parties if a Notice of Federal Tax Lien is recorded or filed. Florida state law controls where the federal tax lien must be filed to be effective and to give proper notice. IRC § 6323(f).