IRS Letter 3172: What To Do When You Receive the Notice of Federal Tax Lien Filing

IRS Letter 3172 is the Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 that the IRS sends to a taxpayer after it has filed a notice of federal tax lien (NFTL) against the taxpayer.

The letter is generated by the Centralized Case Processing Lien Unit (CCP-LU) and sent to the taxpayer via certified mail.

Here is a redacted Letter 3172 that an IRS revenue officer sent one of our clients.

IRS Letter 3172 At a Glance

IRS Letter 3172 Explained, Part by Part

Here is a full explanation of the Letter 3172, part by part.

Note that the Letter 3172 is often accompanied by the Form 12153 that you use to request a collection due process hearing.

Part 1: Heading

At the top right of the Letter 3172 you will see the following important information:

• The date of the letter
• Your taxpayer identification number (SSN or EIN)
• The person to contact regarding the lien filing
• The phone number of the person to contact regarding the lien filing
• The employee identification number of the person to contact regarding the lien filing

Part 2: Notice of Federal Tax Lien Filing and Your Right to a Hearing

Then, in centered type, you’ll see the name of the letter, which also informs you of the two purposes that it serves:

• To inform you that the IRS has filed a notice of federal tax lien against you in county records.
• To give you notice that you have the right to request a collection due process (CDP) hearing to propose the lien filing.

Part 3: Amount on Lien

Next, the IRS provides you with a table of the amount on the lien.

Here is a quick key to the columns on this table:

• Type of Tax: This is the code section or form number relating to the type of tax on which the notice of federal tax lien has been filed. For example, in the example above, the taxpayer was liable for penalties under Internal Revenue Code Section 6721 for failing to file correct information returns as well as payroll taxes reported on Form 941, which is the employer’s quarterly federal tax return.
• Tax Period: This is the last day of the tax period — typically a year but in some cases a quarter — for which you have a balance due.
• Assessment Date: This is the date on which the IRS assessed — that is, officially recorded the liability on the government’s books — the tab liability in the row.
• Amount on Lien: This is the assessed amount of taxes, penalties, and interest for the given tax for the given period in the row at the time the notice of federal tax lien was filed.

Part 4: How to Obtain Current Amount Owed

The amount indicated above on the notice of federal tax lien is of the date the lien was filed.

Of course, additional interest and penalties may be added to your balance over time, and this part of the Letter 3172 is informing you that you can contact the person whose name is at the top right of the letter in order to obtain your current amount owed.

Part 5: Effect of Lien

The next paragraph on the Letter 3172 informs you of the effect of the notice of federal tax lien.

Read this part carefully — note that the notice of federal tax lien does not attach to, say, the specific pieces of real estate you currently own (this is a common misunderstanding among taxpayers).

It attaches to all property you currently own and to all property you may acquire in the future!

Another thing to keep in mind is that the letter’s statement that the lien may damage your credit rating is misleading since tax liens no longer appear on your credit report nor do they affect your credit score.

However, tax liens are still public record and can be discovered by interested parties, so the letter’s indicating that the lien may “hinder your ability to obtain additional credit” is true.

Part 6: Your Appeal Rights

The next paragraph of the Letter 3172 informs you that you have a right to appeal the IRS’s filing of a notice of federal tax lien against you.

Part 7: How to Request a CDP Hearing

This is probably the most important section of your Letter 3172.

In this section, the IRS gives you (brief) instructions about how to appeal the IRS’s levy action.

To do this, you must complete the Form 12153, Request for a collection due process or equivalent hearing, and mail it to the address indicated in this paragraph by the deadline indicated in this paragraph.

If you fail to do so, you may still submit the Form 12153 — but you will not get a collection due process (CDP) hearing; you will get an equivalent hearing.

Part 8: Denial or Revocation of United States Passport

If you owe enough in back taxes — the threshold is currently $62,000 — the IRS may prevent you from obtaining or renewing your passport.

It does this by “certifying” your tax debt to the United States Department of State — basically, telling the State Department that you owe a lot in taxes and therefore it should deny any passport applications you submit.

In certain cases, the State Department may even revoke your existing passport.

So if you are outside the United States — or are planning to travel outside the United States in the near future — it’s essential that you deal with your federal tax debt!

Part 9: Certificate of Release of Notice of Federal Tax Lien

Next, the letter gives you information about how to get your tax lien released.

The options listed here are:

• Paying the amount in full
• The IRS’s acceptance of a bond guaranteeing payment of the amount owed
• A decision made by an Appeals officer to adjust your account

Part 10: If You Have Any Questions

Next, the IRS informs you to direct any questions to the individual indicated at the top right of the first page of the letter.

Part 11: Signature Block

Next, the electronic signature of some ranking IRS official — in this case, that of Elvin Dean Curry, the directors of the IRS’s specialty collections unit.

Part 12: Enclosures

Next, the IRS tells you of the enclosures — that is, the other documents — it has enclosed in the same envelope as your Letter 3172.

Typically, this includes:

• Publication 594
• Publication 1450
• Publication 1660
• Form 668(Y)(C)
• Form 12153

When the IRS Sends Letter 3271

As required by Internal Revenue Code Section 6320(a), the IRS sends Letter 3271 no later than five business days after it files a notice of federal tax lien against a taxpayer.

What You Should Do If You Receive Letter 3271

Below are the steps you should take after you receive a Letter 3271.

For more information about each of these steps, check out our article How to Fight the IRS and Win.

Step 1: Check the Letter 3271 for accuracy.

Don’t assume that the IRS did their math correctly — review the IRS’s numbers against your own.

Step 2: Correct any errors with the IRS.

If you do find an error in the IRS’s math, take it up with your revenue officer.

You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.

Step 3: Seek Penalty Abatement.

For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.

Sometimes the IRS grants it; sometimes they don’t.

But it’s generally at least worth a shot.

For more information about seeking abatement for the penalties on your account, check out this article.

Step 4: Consider requesting a CDP hearing.

It may be in your best interest to request a CDP hearing to protest the filing of the notice of federal tax lien.

Step 5: Pay the Balance Due OR Seek Tax Relief

Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.

You can, of course, pay off your balance in full.  This will (obviously) stop future penalties and interest from accruing.

However, a better option — if you qualify for it — is an offer in compromise.  An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.

That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.

Also keep in mind that thanks to the Fresh Start Program, the IRS will generally withdraw a NFTL if you do the following things:

1. Pay your balance down below $25,000
2. Enter into a direct-debit installment agreement that will pay off your IRS debt within the earlier of 60 months or its collection statute expiration date.
3. Make three consecutive direct-debit payments under the installment agreement.
4. Request withdrawal of the notice of federal tax lien using Form 12277.

For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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