TC 582 and TC 583: Reading the Federal Tax Lien Indicator

Of all the zero-dollar lines on a transcript, TC 582 is the one with the most real-world consequences. It is usually the line that explains why a mortgage closing stalled or a loan officer started asking questions. Here is how to read it, and the codes that go with it.

The lien arises before the TC 582

Start with the law, because it explains what the code does and does not mean. IRC 6321 says that if a person liable to pay a tax "neglects or refuses to pay the same after demand," the amount, including interest, penalties and costs, "shall be a lien in favor of the United States upon all property and rights to property" belonging to that person. IRC 6322 says that lien arises "at the time the assessment is made" and continues until the liability is satisfied or becomes unenforceable by reason of lapse of time.

So the federal tax lien exists by statute once there is an assessment, demand and nonpayment. What the IRS files in public records is a notice of that lien. The TC 582 records the notice.

What TC 582 means

Document 6209 titles TC 582 "Lien Indicator" and says: "Federal Tax Lien has been filed for this tax period." It adds that the transaction "can represent two different types of liens; 'Self-releasing' and 'Re-filed.' Each will have a unique indicator setting."

There is a quirk worth knowing. On individual accounts, 6209 says the same code is also used as a "2032A Indicator" and a "Carry-over Basis Indicator," which are estate-related uses. On almost every individual collection transcript, though, a TC 582 means a lien notice.

The code is posted by tax period. If the IRS filed one notice covering several years, you will typically see a TC 582 on each of those years.

The notice and hearing rights

Filing a notice of lien triggers a notice to you. IRC 6320(a) requires the IRS to notify you in writing of the filing not more than 5 business days after the day the notice of lien is filed, and to tell you of your right to request a hearing during the 30-day period beginning the day after that 5-day period. IRC 6320(c) applies the Collection Due Process hearing rules of IRC 6330, including the suspension rules, to that hearing.

Document 6209 lists the TC 971 action codes that track this: 252, "Lien CDP Notice sent to taxpayer," 253 for an undelivered lien CDP notice, 254 for an unclaimed notice and 255 for a notice refused by the taxpayer. The TC 520 closing code chart in Document 6209 Section 11 lists closing code 76, "Collection Due Process (CDP) filed (Lien)," as suspending the collection statute.

A lien hearing is not just about the lien. Because IRC 6320(c) applies the IRC 6330 hearing rules, the hearing can address collection alternatives such as an installment agreement or an offer in compromise, and spousal defenses, under IRC 6330(c)(2)(A). The underlying liability can be raised only if you did not receive a notice of deficiency or otherwise have a chance to dispute it, under IRC 6330(c)(2)(B). If you miss the window, you lose the Tax Court review that comes with a timely hearing under IRC 6330(d)(1).

So when you see a TC 582, look nearby for the action code 252 line. Its date tells you when the hearing window started.

TC 583 and its definer codes

Document 6209 titles TC 583 "Reverse Lien Indicator." Effective January 2007, it says, a TC 583 must carry a definer code:

The difference between release and withdrawal matters. A release concerns the lien itself; under IRC 6325(f)(1)(A), a certificate of release filed in the same office as the notice is conclusive that the lien is extinguished. A withdrawal is a different action directed at the public notice. If you are trying to clean up a credit report or satisfy a lender, know which one you got. Taxpayer transcripts do not always print the definer code, so ask.

Document 6209 also explains self-releasing liens: TC 583 lines are generated in a conversion run for modules where the last collection statute expiration date has expired and the first lien-only TC 582 posted after a specified cycle. In other words, a lien notice can be self-releasing at the end of the collection period.

When the IRS must release

IRC 6325(a) says the IRS "shall issue a certificate of release of any lien" not later than 30 days after the day on which it finds that the liability "has been fully satisfied or has become legally unenforceable," or after it accepts a qualifying bond. That is why paying off a year, or reaching the end of its collection period, should eventually produce a TC 583 with definer code 1 or 5.

IRC 6325 also provides for other certificates that do not release the lien entirely: a certificate of discharge of specific property under 6325(b), a certificate of subordination under 6325(d), and a certificate of nonattachment under 6325(e) when someone is confused with the taxpayer. Document 6209's designated payment codes include 53 for discharges, 55 for subordinations and 56 for withdrawals, and 07 for a payment received expressly for payoff of the lien. Those are the labels on payments made to get property out from under a lien.

Lien fees on the account

Filing and releasing liens costs money, and the IRS can pass that cost to you. Document 6209 defines TC 360, "Fees and Collection Costs," as assessing "legal fees, security and sale cost, lien fees and other expenses incurred while enforcing collection of delinquent balance due." TC 361 abates it, and TC 694 is the designated payment code for paying fees and collection costs.

If your balance has a small unexplained debit near a TC 582, look for a TC 360.

A worked example

Read it top to bottom and the story is complete: the notice was filed, you were told about your hearing rights, the cost of filing was added, the balance was paid with a payment designated for lien payoff, and the IRS recorded the release. If the last line never appears after a payoff, the IRC 6325(a) 30-day clock is the rule to cite when you ask for it.

Keep in mind that the transcript records the IRS side. The public record lives in the office where the notice was filed. After a release posts, confirm that the certificate was actually filed there, because that is the document a title company or lender will look for.

Liens and CNC

Being currently not collectible does not prevent a lien notice. IRM 5.16.1 says that, in general, a Notice of Federal Tax Lien should be filed on accounts being reported CNC when the aggregate unpaid balance of assessments equals or exceeds $10,000, subject to the criteria and exceptions in IRM 5.12.2. So a TC 530 and a TC 582 close together on the transcript are not a contradiction. See TC 530: Currently Not Collectible.

Reading the lien codes

• Find every TC 582, by year.
• Find the TC 971 action code 252 notice and its date.
• Check for a timely hearing request and a TC 520 closing code 76.
• Look for TC 583 and its definer code on each year.
• Check for TC 360 lien fees.
• If a year is paid or past its collection statute and has no TC 583, ask why.

Liens often travel with other collection codes, so read this alongside Diagnosing an IRS Case From Transcripts. The firm's main site has a general overview of tax liens. The transcript tells you which years are liened and whether each one has been released or withdrawn.