Internal Revenue Service Can
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Internal Revenue Service Trumps Bank’s UCC on Business Receivables

When your business owes the Internal Revenue Service money on delinquent tax, the Internal Revenue Service tax lien will trump your bank’s secured interest in your receivables 45 days after a Notice of Federal Tax Lien (NFTL) is filed.  This is based on the legal references below.

The law figures that after 45 days the account receivables are no longer the same property and is turned over.  Anything beyond that is a delinquent debt owed to the business.

How to Avoid This.  Establish an installment agreement with the Internal Revenue Service.  One of the covenants of the agreement will be that the Internal Revenue Service can levy your receivables if you default.  Stay compliant.  Another may be to provide another collateral for security, or even a bond. 

References:

IRM 5.15.1.32

IRM 5.17.2.6.6.1

IRC 6323(c)

IRC 6323(d)

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