IRC 6321

So, why does the government bother to reduce a federal tax lien to judgment in the federal court? The case of United States of America v. Wardle, case CV-23-20-BU-BMM handed down September 30, 2024 by the United States District Court for the District of Montana illustrates one major benefit. The USA filed suit to reduce the federal tax liens to judgment against the taxpayer, Christopher F. Wardle. Mr. Wardle owed in excess of $1 million in taxes. Mr. Wardle contended that the liens were unenforceable due to the passage of time. The taxpayer cited the general premise that the IRS has 10 years from the date a tax was assessed to collect the tax, interest and penalties. However, the Court ruled that a federal tax judgment is never subject to a time limit. Once the assessment has been reduced to judgment, the liability merges into the judgment and that liability cannot become unenforceable due to lapse of time. The Internal Revenue Manual actually describes this at Section 5.17.4.8.2.3 wherein it states that “[w]here the Internal Revenue Service has reduced assessments to judgment, it may bring a lien foreclosure action after the statutory period.” It was not part of the case, but the manual continues in this section as follows: “[w]hile obtaining a judgment extends the life of the lien for the purpose of bringing a lien foreclosure action, in order to maintain the priority of the lien in relation to other creditors, the Internal Revenue Service must refile the Notice of Federal Tax Lien as provided in IRC 6323(g).”