A federal tax lien is created on balance-due cases in which the taxpayer has received a notice demanding payment and has neglected or refused to pay. The IRS files a Notice of Federal Tax Lien (lien notice) to protect its claims against taxpayers who owe delinquent taxes. These lien notices establish the IRS's priority among secured creditors for the taxpayers' property.

The IRS must notify the affected taxpayers in writing, at their last known address, within five business days of the lien filings. However, as noted in previous TIGTA audits, the IRS has not always complied with this statutory requirement.

In addition, the IRS does not always follow its own internal guidelines for timely notifying taxpayer representatives of the filing of lien notices. The IRS does not have an automated process that updates taxpayer representative information directly to the system that generates the lien notices.

"This is a serious matter," said J. Russell George, the TIGTA. "Because of this problem, some taxpayers' rights to appeal the lien filings may have been jeopardized, and others may have had their rights violated when the IRS did not notify their representatives of the lien filings.”

The TIGTA recommended that the IRS should consult with its Office of Chief Counsel and identify any actions necessary to correct the potential taxpayer violations for the untimely lien notices and ensure compliance with undelivered lien notices procedures.

IRS officials have agreed with all of the recommendations and are planning corrective actions.