How Long Can the IRS Collect on a Tax Lien?

It may look like a reasonably small bill from the Internal Revenue Service (IRS), but that tax bill could follow you for years as a tax lien. Once the IRS issues a lien on your assets, it will usually remain there until the statute of limitation expires or until the tax is paid in full. If you think you may ever want to refinance your home, sell your home, or apply for a line of credit, then you should know how long the IRS has to collect on your tax lien.

Definition

A lien is a financial mechanism which secures the IRS interest in a taxpayer’s assets. Unlike a levy, a lien is not a seizure of your assets, but a way of ensuring that the IRS recovers the tax owed upon sale of the property. The IRS will send you a notice advising you of your amount of tax due and is allowed to issue a lien as early as 10 days from the date of the notice.

Assessment

Generally, the IRS has three years from the date the return was filed to assess tax. For timely filers (those who file by April 15th), any tax owed is considered assessed on April 15th. The IRS has three years from that date to assess any additional tax. For taxpayers who willfully evade tax, there is no statute of limitations on assessment. Also, the statute is extended to six years for taxpayers who underreport their income by 25 percent or more. If a taxpayer fails to file a return, the IRS has the right to file a substitute return on their behalf. In these cases, the IRS may make an assessment of tax owed if the taxpayer does not respond to the IRS filing within 90 days.

Statute of Limitations

The IRS has 10 years from the assessment of the tax to collect the tax owed. Thus, the lien is allowed to remain on your property for 10 years or until the debt is paid. Once the debt is paid, the IRS will usually send you a certificate of lien release in the mail.

Remedies

In addition to affecting your credit, a lien can prevent you from borrowing against your assets because creditors know that upon sale of the property, the IRS lien is primary. In certain instances, you can request that the IRS subordinate their lien in favor of another creditor. To do this, you’ll need to request a Certificate of Subordination by the IRS. There is no standard form used to request the certificate. You will need to write a letter to the IRS in which you include a description and location of the property onto which the lien is attached, a copy of the tax lien, the reason for the request, a deed, the fair market value of the property, a daytime phone number and a written declaration that the information which you are presenting is true to the best of your knowledge.