The number of notices of federal tax lien (NFTLs) filed by the IRS has declined by  67 percent since 2019, the Treasury Inspector General for Tax Administration (TIGTA) disclosed in a report about the IRS's compliance with NFTL collection due process procedures.

Last year, 179,000 NFTLs were filed, down by 67 percent from the roughly 544,000 filed in 2019 and down by 84 percent from the 2010 high of nearly 1.1 million. Since the peak, filings have generally declined, reaching a low of approximately 157,000 in 2022.

TIGTA issued the report because it is is required by law to determine annually whether the IRS complied with collection due process (CDP) requirements pursuant to the Internal Revenue Code.

“The IRS attempts to collect delinquent Federal taxes due from taxpayers by sending letters, and in some instances either making telephone calls or meeting face-to-face with taxpayers,” TIGTA explained in the report. “As a matter of law, a lien arises upon the occurrence of a tax delinquency and encumbers the property of the delinquent taxpayer.”

To protect the government’s claim, the IRS has the authority to file an NFTL in the appropriate state and local office to notify interested parties that a lien exists.

TIGTA further explained that on the first filing of an NFTL, "the IRS must notify the affected taxpayers in writing at their last known address, within five business days of the NFTL filing, of their right to a CDP hearing before the Independent Office of Appeals. Taxpayers may not be timely advised of their appeal rights if the IRS does not comply with this statutory requirement. Taxpayers have the right to elect a CDP hearing after the filing of the NFTL wherein the taxpayer can raise any relevant issue, including the appropriateness of the NFTL filing or other collection actions. Taxpayers have 30 calendar days to request a CDP hearing with the IRS’s Independent Office of Appeals." It added that While I.R.C. § 6320(c) "the Treasury Regulations allow the IRS to levy during lien CDP hearings, although IRS procedures state that in general its policy is not to do so."

TIGTA is required by law to conduct an annual audit to determine annually whether the IRS complied with CDP requirements in accordance with IRC Section 6320.

TIGTA’s systemic review of 103,460 NFTLs that were filed between July 1, 2022, and June 30, 2023, in which a CDP notice was required to be sent to the taxpayer, and a separate review of a statistical sample of 117 NFTLs from the same population, identified a total of 272 taxpayers that were potentially not timely mailed a CDP notice as required by IRC Section 6320(a). TIGTA also identified thousands of levies that were issued during the period when taxpayers had the right to request a lien CDP hearing. It identified 5,801 field collection cases in which revenue officers took levy action on taxpayers during the 30-day calendar period in which they had the right to request a hearing. It also  identified four cases in which levies were issued on taxpayers for a tax period in which NFTL appeals were filed timely, and the appeals determinations were still pending. 

Based on its findings, TIGTA issued five recommendations to the IRS. They are:

1) Take corrective action on the cases identified in the statistical sample in which the lien notice was not mailed timely;

2) Ensure that the corrective actions initiated on the cases systemically identified are completed, and safeguards are implemented to protect against the recurrence of the causal issues;

3) Direct the director of collection to establish Field Collection Internal Revenue Manual (IRM) procedures that prohibit field employees from taking levy action during the 30-calendar-day period that the law provides taxpayers can elect lien CDP hearings;

4) Apply the retention standard when evaluating IRS Collection employees, managers, and executives who intentionally disregard IRS policies designed to protect taxpayers; and

5) Review disaster procedures for NFTL processing and consider updates, as needed, to reduce burden for taxpayers impacted by disasters.

The IRS agreed with four of the five recommendations. With regard to recommendation 3, the IRS did not agree to establish Field Collection IRM procedures to prohibit field employees from taking levy action on taxpayers during the period the law provides taxpayers to elect a lien CDP hearing, which potentially impacted 5,801 taxpayers.