CTRS Tax Liens and Levies — Advanced Strategies Flashcards

What is a 'Certificate of Discharge' and when would a taxpayer seek one?

Answer: A certificate that removes the federal tax lien from a specific piece of property, commonly sought during a real estate sale to allow the transaction to close

A Certificate of Discharge under IRC §6325(b) removes the federal tax lien from a specific property, allowing the sale to proceed while the lien attaches to the sale proceeds.

What is a 'Certificate of Subordination' and how does it benefit a taxpayer?

Answer: It allows a creditor with a junior lien to move ahead of the federal tax lien in priority, enabling the taxpayer to obtain financing they otherwise couldn't

A Certificate of Subordination under IRC §6325(d) causes the federal tax lien to be subordinated to another creditor's lien, allowing the taxpayer to refinance or obtain a business loan when the federal tax lien would otherwise block it.

What property is exempt from IRS levy under IRC §6334?

Answer: A minimum amount of weekly wages, unemployment benefits, workers' compensation, certain pension and retirement benefits, and primary home equity under specific conditions

IRC §6334 provides a list of levy-exempt property including minimum wages (IRC §6334(a)(9)), unemployment benefits, workers' compensation, and certain public assistance payments.

What is a 'nominee lien' in the context of federal tax collection?

Answer: A lien the IRS places on property held by a third party (the nominee) who holds it on behalf of the taxpayer to shield it from collection

A nominee lien is filed against property that is legally in someone else's name but beneficially owned by the taxpayer, preventing the taxpayer from using nominees to hide assets from IRS collection.

What is the 'wrongful levy' action under IRC §7426 and who can bring it?

Answer: A third party whose property was wrongfully seized by the IRS to satisfy another person's tax debt can bring a wrongful levy action to recover the property or its value

IRC §7426 allows third parties (not the taxpayer) whose property was wrongfully levied by the IRS to sue for return of the property or its monetary value.

What is the standard for the IRS to release a Notice of Federal Tax Lien after full payment?

Answer: The IRS must release the lien within 30 days after the liability is fully satisfied or becomes legally unenforceable

Under IRC §6325(a), the IRS is required to release a federal tax lien within 30 days after the liability is satisfied or becomes legally unenforceable.