IRS TAX PROBLEMS – What is the Priority of a “Federal Tax Lien”?

IRS TAX PROBLEMS – What is the Priority of a “Federal Tax Lien”?

The priority of a “Federal Tax Lien” is governed by Federal law (Aquilino v. United States, 363 U.S. 509, 513-14 (1960). Under Federal law, a “Tax Lien” in favor of the Internal Revenue Service (IRS) attaches to all property owned by a person who “neglects or refuses” to pay taxes for which he is liable after the IRS demands payment. (Internal Revenue Code (IRC) § 6321). The Tax Lien arises at the time the tax assessment is made ( IRC § 6322), and generally takes priority over a lien created after that date under the common-law principle that “the first in time is the first in right” (United States v. City of New Britain, 347 U.S. 81, 85 (1954), even if the Tax Lien is unrecorded (United States v. Snyder, 149 U.S. 210, 214 (1893). But a Tax Lien is notvalid as against any . . . holder of a security interest . . . until notice thereof . . . has been filed by the Secretary [of the Treasury]” (IRC § 6323(a).

As used in IRC § 6323(a), a “security interest” is defined to mean “any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability” (IRC § 6323(h)(1), and its existence at any given time depends on whether, inter alia, “the interest has become protected under local law against a subsequent judgment lien arising out of an unsecured obligation” (IRC § 6323(h)(1)(A).

Do You Qualify For The IRS “First-Time Penalty Abatement Waiver”?

Do You Qualify For The IRS “First-Time Penalty Abatement Waiver”?


Requesting Penalty Relief – Taxpayers can request relief from “failure-to-file”, “failure-to-pay”, and “failure-to-deposit” Penalties as follows:

  • (1) Before the Internal Revenue Service (IRS) assesses a Penalty, you can file a Penalty non-assertion request with a paper return to request that the IRS not automatically assess a Penalty.
  • (2) After the IRS has assessed a Penalty, you can request “Penalty Abatement”, typically by writing a Penalty Abatement letter or by calling the IRS.

  • (3) After you have paid the Penalty, you can request a Refund using IRS Form 843, “Claim for Refund and Request for Abatement. You must file the Refund Claim within three (3) years of the tax return due date or filing date, or within two (2) years of the date you paid the Penalty.

First-Time Abatement Waiver – In 2001, the IRS established the “First-Time Penalty Abatement Waiver”, which allows a first-time noncompliant taxpayer to request abatement of certain Penalties for a single tax period—one (1) tax year for individual and business income taxes and one (1) quarter for payroll taxes.

Eligible Penalties – The First-Time Penalty Abatement Waiver applies only to certain Penalties and certain tax returns filed as follows:

  • (1) Individual taxpayers can request a First-Time Penalty Abatement Waiver for “failure-to-file” and “failure-to-pay” Penalties. Estate and Gift tax returns are not eligible.
  • (2) Business and Payroll taxpayers can request a First-Time Penalty Abatement Waiver for “failure-to-file”, “failure-to-pay”, and/or “failure-to-deposit” Penalties.
  • (3) For Individual and Business taxpayers, the “estimated tax” and “accuracy-related” Penalties are not eligible.

Three (3) Years of Clean Compliance History – In order to qualify for a First-Time Penalty Abatement Waiver, you must show tax return filing and tax payment compliance and a Three (3)-year clean penalty history.


IRS TAX PROBLEMS – Federal Tax Liens; Death; and Jointly-Owned Property.

IRS TAX PROBLEMS: Federal Tax Liens, Death and Jointly-Owned Property.

According to a recent Federal District Court case (NPA Associates, LLC v. United States Revenue Service, et al), Federal Tax Liens “cannot extend beyond the property interests held by the delinquent taxpayer” citing United States v. Rodgers, 461 U.S. 677, 691 (1983). According to the Court’s analysis, the “Federal Tax Lien statute itself ‘creates no property rights but merely attaches consequences, federally defined, to rights created under state law.’” United States v. Craft, 535 U.S. 274, 278 (2002) (quoting United States v. Bess, 357 U.S. 51, 55 (1958)).

In most States, when property is held in “Joint Tenancy with a Right of Survivorship” (“JTWROS”), Federal Tax Liens issued against a deceased Joint Tenant’s interest in the property are extinguished when the deceased Joint Tenant dies and any other living Joint Tenants succeed to his share. See, e.g., Biggers v. Crook, 283 Ga. 50, 53, 656 S.E.2d 835, 838 (2008).

According to the Court’s analysis, “a surviving Joint Tenant succeeds to the share of the deceased Joint Tenant by virtue of the conveyance which created the Joint Tenancy, not as the successor of the deceased.” See also Internal Revenue Manual § – “In most states, if the individual, against whose property a Federal Tax Lien attaches, dies before any of the other joint tenants, then the Lien ceases to attach to the property . . . [S]tate law should always be consulted to determine whether there is an exception to the general rule.”

IRS TAX PROBLEMS – What is a “Taxpayer Assistance Order” (TAO)?


What is a “Taxpayer Assistance Order” (TAO)?

 When an application for a “Taxpayer Assistance Order” (TAO) is filed by a taxpayer or the taxpayer’s Tax Lawyer or Tax Attorney, the National Taxpayer Advocate (NTA) may issue a TAO if, in the determination of the NTA, the taxpayer is suffering or is about to suffer a “significant hardship” as a result of the manner in which the internal revenue laws are being administered by the Internal Revenue Service (IRS), including action or inaction on the part of the IRS. The term “National Taxpayer Advocate” includes any designee of the NTA, such as a “Local Taxpayer Advocate”.

Significant hardshipBefore a TAO may be issued, the NTA is required to make a determination regarding significant hardship. The term “significant hardship” means a serious privation caused or about to be caused to the taxpayer as the result of the particular manner in which the revenue laws are being administered by the IRS. Significant hardship includes situations in which a system or procedure fails to operate as intended or fails to resolve the taxpayer’s problem or dispute with the IRS. A significant hardship also includes, but is not limited to:

  • An immediate threat of adverse action;
  • A delay of more than 30 days in resolving taxpayer account problems;

  • The incurring by the taxpayer of significant costs (including fees for professional representation) if relief is not granted; or

  • Irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted.

Examples of significant hardship.

Example 1. Immediate threat of adverse action.

The IRS serves a Levy on the taxpayer’s bank account. The taxpayer needs the bank funds to pay for a medically necessary surgical procedure that is scheduled to take place in one week. If the Levy is not released, the taxpayer will lack the funds necessary to have the procedure. The taxpayer is experiencing an immediate threat of adverse action.

Example 2. Irreparable injury.

The taxpayer has arranged with a bank to refinance his mortgage to lower his monthly payment. The taxpayer is unable to make the current monthly payment. Unless the monthly payment amount is lowered, the taxpayer will lose his residence to foreclosure. The IRS refuses to subordinate the Federal Tax Lien, or discharge the property subject to the Lien. As a result, the bank will not allow the taxpayer to refinance. The taxpayer is facing an irreparable injury if relief is not granted.

Taxpayer Assistance Order (TAO) – A TAO is an order by the NTA to the IRS. The IRS will comply with a TAO unless it is appealed and then modified or rescinded by the NTA, the IRS Commissioner, or the IRS Deputy Commissioner. A request for a TAO shall be made on a IRS Form 911, “Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order)” (or other specified form) or in a written statement that provides sufficient information for the Taxpayer Advocate Service (TAS) to determine the nature of the harm or the need for assistance. A taxpayer’s right to administrative or judicial review will not be diminished or expanded in any way as a result of the taxpayer’s seeking assistance from TAS.

After establishing that the taxpayer is facing “significant hardship” and determining that the facts and law support relief to the taxpayer, the NTA may issue a TAO ordering the IRS within a specified time to—

(1) Release an IRS Levy. Release levied property (to the extent that the IRS may by law release such property); or

(2) Take certain other actions. Cease any action, take any action as permitted by law, or refrain from taking any action with respect to a taxpayer;

(3) Expedite, review, or reconsider an action at a higher level. Although the NTA may not make the substantive determination, a TAO may be issued to require the IRS to expedite, reconsider, or review at a higher level an action taken with respect to a determination or collection of a tax liability.

TAO Examples. The following examples assume the existence of “significant hardship”:

Example 1. The taxpayer’s Tax Lawyer or Tax Attorney contacts a Local Taxpayer Advocate because a wage Levy is causing financial difficulties to the taxpayer. The NTA determines that the Levy should be released as it is causing economic hardship. The NTA may issue a TAO ordering the IRS to release the Levy in whole or in part by a specified date.

Example 2. The IRS rejects the taxpayer’s Offer in Compromise (OIC). The taxpayer’s Tax Lawyer or Tax Attorney files an IRS Form 911, “Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order).” The NTA discovers facts that support acceptance of the Offer in Compromise (OIC). The NTA may issue a TAO ordering the IRS to reconsider its rejection of the OIC or to review the rejection of the OIC at a higher level.

Suspension of statutes of limitations— The running of the applicable period of limitations for any action which is the subject of a Taxpayer Assistance Order (TAO) shall be suspended for the period beginning on the date the Ombudsman receives an application for a Taxpayer Assistance Order (TAO) and ending on the date on which the Ombudsman makes a determination with respect to the application, and for any additional period specified by the Ombudsman in an order issued pursuant to a taxpayer’s application. For the purpose of computing the period suspended, all calendar days except the date of receipt of the application shall be included.

IRS TAX PROBLEMS – What Should You Do If You Haven’t Filed Your Tax Return?

IRS TAX PROBLEMS – What Should You Do If You Haven’t Filed Your Tax Return?


If you haven’t filed a tax return in a few years, contact a Tax Lawyer / Tax Attorney to help you get back on track.

You may be entitled to tax credits that result in the Internal Revenue Service (IRS) owing you a Tax Refund. If the IRS does owe you a Tax Refund, you only have Three (3) years from the date your return was due to file and claim it. You don’t have to worry about penalties for not filing if you’re entitled to a Refund, because those penalties only apply if you owe taxes.

Also, even if you do owe taxes, the IRS has programs under the IRS “Fresh-Start Initiative” that make paying easier than you may think.

As stated above, there is no penalty for failure to file if you are due a Refund. But, if you wait to file a return or otherwise claim a Refund, you risk losing your Refund altogether. You must file an original return within Three (3) years of its due date to claim your Refund in most instances.

If you owe taxes and have not filed a timely return, you may be subject to the “Failure to File Penalty”, unless you can show “Reasonable Cause” for failing to file timely. If you did not pay your tax in full by the due date of the return, you may also be subject to the “Failure to Pay Penalty”, unless you have “Reasonable Cause” for your failure to pay timely, or the IRS has approved your “Application for Extension of Time for Payment of Tax Due to Undue Hardship”.

Interest is charged on taxes and penalties not paid by the due date, even if you have an extension of time to file.

If you are required to file a return, but you cannot pay all of the tax due on your return, you may be able to establish a payment agreement with the IRS under the IRS “Fresh-Start Initiative”.

IRS TAX PROBLEMS – What is “Fast Track Settlement” (FTS) in IRS Tax Appeals?




Fast Track Settlement” (FTS) is designed to help taxpayers expeditiously resolve disputes during an examination while their case is still in Examination or Collection.

Fast Track Settlement brings the IRS Office of Appeals resources to a mutually agreed upon location to resolve the dispute before the 30-day Appeals letter is issued. A specially trained IRS Appeals employee facilitates the discussion between you and the IRS Revenue Agent and their Team or Group Manager to reach and execute a settlement with which you both agree.

You may request Fast Track Settlement after IRS Form 5701, Summary of Issues, Examination Re-Engineering Lead Sheets or other similar document has been issued and you have provided a written response.

Your benefits with Fast Track Settlement include:

  • A one-page application, Form 14017;

  • Consideration of the hazards of litigation;

  • An answer within 60 days for Small Business Self Employed (SB/SE) cases;

  • No ‘hot’ interest under IRC 6621;

  • An option to withdraw from the process at any time;

  • Retention of all traditional appeal rights;

  • Significantly shorter IRS experience;

  • Only one tax computation;

  • Your case closes agreed in the other Operation Division; and

  • Immediate use of Delegation Order 236

Fast Track Settlement is available for certain LB&I, SB/ SE and TE/GE taxpayers. The program is also available to other IRS Operating Division taxpayers on a case-by-case basis.

IRS TAX PROBLEMS – What is “Fast Track Mediation” (FTM) in Tax Appeals?




Fast Track Mediation” (FTM) is designed to help Small Business/Self Employed (SB/SE) taxpayers resolve many disputes resulting from Examinations (Audits), Offers in Compromise, Trust Fund Recovery Penalties, and other collection actions while your case stays in SB/SE.

Appeals personnel trained in mediation help you and an IRS representative discuss the issues involved in your disagreement, and possible ways to resolve it. The goal is to reach a jointly agreeable solution, consistent with relevant law, within forty (40) days. The mediator will not require either party to accept a certain outcome.

You and the IRS representative must sign an agreement to Mediate, IRS Form 13369, for your case to be considered for Mediation. You don’t have to file a formal protest to request Fast Track Mediation, but you must provide a written position with your request for Mediation.

Most cases, which are not docketed in any court, qualify for Fast Track Mediation.

Some of the excluded cases are:

  • Issues with no legal precedent;

  • Issues where the courts’ decisions differ

   between jurisdictions;

  • Campus and Automated Collection Service


  • Collection Appeals Program cases; and

  • Those with only frivolous arguments

For Mediation to succeed, all the decision-makers must be present. You may represent yourself at the Mediation session, or you may officially appoint someone to represent you. You can bring anyone you choose to support your position.

You may withdraw from the Mediation process anytime. You retain all the usual appeal rights for any issues that do not get resolved through Fast Track Mediation.

IRS TAX PROBLEMS – How Does “Arbitration” Work in IRS Appeals?


If settlement negotiations are unsuccessful, taxpayers and the IRS Office of Appeals may jointly request binding Arbitration for qualifying, factual issues already in the Appeals administrative process after consulting with each other.


Some of the cases excluded from Appeals Arbitration are:


  • Compliance and Appeals Coordinated Issues;


  • Legal issues;


  • Collection issues, except for those detailed in Announcement 2011-6, or subsequent    guidance issued by the IRS;


  • Those not consistent with sound tax administration;


  • Frivolous arguments; and


  • Those where you did not act in good faith during settlement negotiations.