Notice of Federal Tax Lien Filed (Letter 3172): What It Does and How It Comes Off

What the federal tax lien is and why the IRS filed it

The federal tax lien arises by law under IRC section 6321 once the IRS assesses the tax, sends the first bill and does not receive payment within ten days, and it attaches to everything you own and everything you acquire later. The NFTL, Form 668(Y)(c), is the public filing under section 6323, recorded with the county recorder for real property and with the Secretary of State for business personal property, and it gives the IRS priority over anyone who later lends against or buys the property. The IRS generally files once the unpaid balance passes $10,000.

The lien is a public record, and although the three credit bureaus stopped reporting tax liens in 2018, lenders and title companies search public records and find it. It blocks clean title on a sale or a refinance until it is addressed, and it follows the property, so transferring it to a relative or a new company changes nothing. It takes nothing, though: a levy is the seizure, it runs on a separate notice, and it is covered on our IRS bank levy and wage levy page.

The 30-day hearing deadline and what happens if nothing is done

The IRS has to mail Letter 3172 within five business days after filing the notice, and you have 30 days after that five-day period, a date printed on the letter, to request a Collection Due Process (CDP) hearing on Form 12153. At the hearing the IRS Independent Office of Appeals checks whether the filing followed procedure and issues a Notice of Determination, which you can take to the United States Tax Court within 30 days. A timely request also suspends the ten-year collection statute under section 6502 while the hearing is pending, and if you miss the date, an equivalent hearing is still available within one year. If nothing is done, the notice stays on the public records for the life of the debt, and interest and penalties keep running. The notice carries a “last day for refiling” and self-releases if the IRS does not refile before then, but that date sits about ten years after the assessment.

What to do in the first 30 days

The first 30 days decide whether you keep the hearing right and which of the four remedies you will use.

1. Calendar the date printed on the letter; the 30 days run from the end of the five-business-day mailing period.
2. Get the recorded Form 668(Y)(c) from the county recorder or the Secretary of State and check the periods, amounts and last day for refiling against the letter.
3. Pull account transcripts for each period to confirm the assessment dates, the balance, the collection statute, and the address the CP14 bill went to.
4. File Form 12153 before the date if the filing was premature or against procedure, or you want Appeals to consider a payment plan, an offer or a withdrawal.
5. File any missing return and start current payments, and if a sale or refinance is pending, tell the escrow or loan officer now, because the IRS wants a discharge or subordination application at least 45 days before closing.

Your options: the four ways a federal tax lien comes off

A filed federal tax lien comes off through release, withdrawal, discharge or subordination, and each is a separate application on a separate form.

• Release. Under section 6325(a) the IRS issues a Certificate of Release, Form 668(Z), within 30 days after the balance is paid or the liability becomes legally unenforceable.
• Withdrawal. Form 12277 under section 6323(j) removes the notice from the public records as though it had not been filed. The IRS grants it when the filing was premature or not by procedure, when withdrawal helps collection, or on a direct debit installment agreement with a balance of $25,000 or less after three consecutive payments.
• Discharge. Form 14135 under section 6325(b), with Publication 783, takes one property out from under the lien so a sale can close, with the proceeds applied as the IRS directs.
• Subordination. Form 14134 under section 6325(d), with Publication 784, lets a new lender step ahead of the IRS so a refinance that helps collection can close.

Underneath the four remedies sits the debt itself, handled on Form 433-A or Form 433-B through an installment agreement, currently not collectible status or an offer in compromise; paying the debt is the only remedy that ends the lien for good.

What Brotman Law does with a filed lien

Most lien work has a closing date attached, so we run it backward from that date, and where there is no transaction we pick the remedy the numbers support and file for it. The Form 2848 goes in the day we are retained, and we pull the transcripts and the recorded notice the same week to confirm the balance, the assessment dates and the collection statute. We check the filing against procedure, meaning the address the CP14 bill went to, the ten-day wait, and whether a payment plan or offer was already pending. If the hearing helps we file Form 12153 before the date and present the alternative to Appeals. For a sale we assemble the Form 14135 package and work the IRS Advisory unit and the escrow officer directly; for a refinance it is Form 14134 with the loan estimate. On a balance of $25,000 or less we set up the direct debit agreement and file Form 12277 after the third payment, and when the debt is paid we make sure Form 668(Z) is issued and recorded.

Do you need a lawyer for this?

A balance under roughly $50,000 with no revenue officer, no levy or lien and no business payroll tax can usually be handled with an IRS payment plan you set up yourself, and a filed lien is one of the facts that changes that answer. If the balance is $25,000 or less, you can afford direct debit payments that clear it within 72 months, and nothing is pending at escrow, you can do this yourself: apply for the long-term payment plan online at IRS.gov, choose direct debit, make three consecutive payments, and file Form 12277 asking for withdrawal. Our monthly engagement fits when the balance is large, when a sale or refinance is on a clock, when a revenue officer is assigned, when a levy is in play, or when the debt is business payroll tax.

How the monthly flat fee works here

Many matters like this one run as a monthly flat-fee engagement: one number, agreed up front, that covers agency contact, deadlines, document responses and strategy until the matter resolves. For a lien matter that means the Form 2848, the transcript and recording review, the Form 12153 hearing when it helps, the discharge, subordination or withdrawal application with its exhibits, and the calls with Advisory and your escrow officer until the certificate issues.

Documents to gather

Bring the letter, the recorded notice, the records behind a Form 433, and the paperwork for whatever the lien is blocking.

• Letter 3172 with its envelope, and the recorded Form 668(Y)(c).
• Every IRS notice for the periods on the lien, and the last filed return for each.
• Three months of bank statements, pay stubs or a profit and loss statement, and proof of monthly expenses.
• For a sale: the purchase contract, the preliminary title report, an appraisal, senior payoff demands, and the estimated closing statement.
• For a refinance, the loan estimate; for a withdrawal, the installment agreement acceptance letter and the payment history.

Does a federal tax lien mean the IRS is taking my house?

No. A lien is a claim that follows the property, and a levy is the seizure; a levy on a principal residence also requires a federal court order under section 6334(e). The effect of the lien is on title: the house cannot be sold or refinanced with clear title until the lien is paid, discharged or subordinated.

Does the Notice of Federal Tax Lien show on my credit report?

Not since 2018, when Equifax, Experian and TransUnion stopped reporting tax liens. Mortgage lenders and title companies search the county records instead and find it, and an underwriter treats it as a debt to be paid, discharged or subordinated before funding.

Can I sell my house with a federal tax lien on it?

Yes. If the equity covers the balance, the IRS is paid from escrow and issues the release under section 6325(a). If it does not, a discharge on Form 14135 takes the house out from under the lien so the sale closes.

What is the difference between a lien release and a lien withdrawal?

A release, Form 668(Z), means the lien is satisfied, and the public records show a lien that was filed and then released. A withdrawal, Form 12277, removes the notice as though it had never been filed, and the debt remains unless it has been paid.

Can I still request the hearing if the 30 days have passed?

Yes, as an equivalent hearing, requested on Form 12153 within one year of the date on the letter. Appeals reviews the same issues, but its answer is a decision letter rather than a Notice of Determination, and there is no Tax Court review afterward.

Does bankruptcy remove a federal tax lien?

Generally not as to property you owned when the bankruptcy was filed. A discharge can end your personal liability for the tax, but the lien stays attached to that property, so a house that was yours before the filing still carries it.

Related pages

• IRS collections attorney
• Tax lien attorney, for California liens and lien work tied to a closing
• IRS CP14 notice
• IRS CP501 and CP503 reminder notices
• IRS CP504 Notice of Intent to Levy
• IRS Final Notice of Intent to Levy (LT11 or Letter 1058)
• IRS revenue officer assigned to your case
• IRS bank levy and wage levy
• Trust fund recovery penalty (Letter 1153)
• IRS passport certification (CP508C)
• IRS Form 433 financial statement