Novak v. Commissioner (T.C. Memo. 2026-52): When "My Finances Changed" Isn't Enough — The Tax Court on Installment Agreements and Federal Tax Liens

On June 17, 2026, the United States Tax Court handed the IRS a clean win in Novak v. Commissioner, T.C. Memo. 2026-52 — a Collection Due Process case that illustrates one of the most important and misunderstood rules in IRS collection law: telling the IRS your financial situation has changed is not enough. You have to prove it. And if you don't, the IRS can reject your installment agreement request and sustain its lien against you, and the Tax Court will not second-guess that decision.

This case is a wake-up call for any taxpayer navigating IRS collection — especially high-net-worth individuals who assume their wealth is working in their favor, or taxpayers who believe that simply requesting a payment plan will pause IRS enforcement. Understanding Novak could save you thousands of dollars and months of stress. You can learn more about the process in our overview of U.S. Tax Court procedures and how Collection Due Process hearings work.

Who Is Jon Novak?

Jon B. Novak is a Nebraska resident who, by any objective measure, was not a struggling taxpayer. His financial statements reflected over $15 million in bank and brokerage accounts, stock holdings valued at nearly $60 million combined, and net equity exceeding $3 million in real property. He had jointly filed federal income tax returns with his spouse for the 2017, 2018, and 2019 tax years.

After the IRS examined those returns and made its adjustments, the agency on February 27, 2023, assessed additional tax and interest totaling more than $1.7 million across the three years: $354,503 in tax plus $62,213 in interest for 2017; $893,629 plus $114,342 for 2018; and $268,640 plus $26,052 for 2019. These were not trivial amounts — but relative to Novak's reported asset base, they represented a small fraction of his net worth.

The Pre-CDP History: Requesting an Installment Agreement

Rather than paying the assessed amounts, Novak requested an installment agreement — a payment plan authorized under I.R.C. § 6159(a) that allows taxpayers to pay their federal tax debt in monthly installments. He submitted Form 9465 and a Collection Information Statement (Form 433-F) dated December 29, 2022, disclosing his financial picture.

The problem was straightforward: the IRS Collection function reviewed the Form 433-F and concluded that Novak had more than sufficient assets to pay the full liability immediately. A revenue officer informed Novak's representative on October 4, 2023, that no installment agreement would be approved and that a Notice of Federal Tax Lien (NFTL) would be filed if the balance was not promptly paid. To understand the mechanics of how liens attach and your options to address them, see our IRS levy and lien appeal guide.

On October 20, 2023, the IRS filed the NFTL. Four days later — on October 24, 2023 — the IRS issued a CDP Notice (formally, a "Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320") via certified mail. Novak timely filed Form 12153 requesting a Collection Due Process hearing.

The CDP Hearing: Three Months, Zero Documents

At the CDP hearing, Novak made a consequential strategic decision: he did not dispute that he owed the underlying taxes. That choice limited the Tax Court's eventual scope of review to abuse of discretion only — a significantly more deferential standard than de novo review. He requested an installment agreement as a collection alternative, but this time claimed his financial circumstances had materially changed since he had submitted the Form 433-F. His representative asserted that Novak had liquidated assets to address a business cash shortage and planned to sell part of his business in March 2024, with the proceeds used to pay the IRS liability.

The Appeals officer (AO) responded professionally: he requested the documentation needed to evaluate these claims. An updated Form 433-A (OIC), brokerage statements, mortgage statements, and substantiation of the claimed asset liquidations. Novak received multiple deadline extensions — ultimately through February 6, 2024 — giving him nearly three months to produce documents.

He provided nothing. No brokerage statements. No updated financial statement. No documentation of any asset liquidation. No evidence that a business sale was real, pending, or imminent. The AO sustained the NFTL filing on February 28, 2024, and the Notice of Determination (NOD) issued on March 27, 2024. Novak petitioned the Tax Court.

Novak's Five Arguments Before the Tax Court

Novak raised five challenges to the IRS determination, all of which the Tax Court rejected on the Commissioner's motion for summary judgment under Rule 121:

• Verification failure: He argued conflicting dates (October 20 vs. October 24) created a genuine factual dispute about whether the CDP Notice was mailed within five business days as required by § 6320(a)(2), implicating his due process rights under the Fifth Amendment.
• Premature NFTL filing: He claimed the lien was filed before his installment agreement was formally rejected, impairing his ability to access funds and damaging his business credit.
• Unreasonable timeline: He argued the AO should have extended the deadline to March 2024 to allow the business sale to close.
• Improper rejection of the installment agreement: He contended the $60 million in stock was actually an illiquid business interest, not freely tradeable securities, and that Appeals failed to account for loans against his assets and other liabilities.
• Inadequate balancing under § 6330(c)(3)(C): He asserted the NOD did not demonstrate that the collection action was no more intrusive than necessary.

How the Tax Court Ruled — and Why

Judge Jenkins granted the Commissioner's motion for summary judgment in full. Here is how the Court addressed each challenge:

1. Verification Was Proper (§§ 6320, 6321, 6322, 6323)

The Court began with a foundational point: a federal tax lien arises automatically under § 6321 upon a taxpayer's failure to pay after notice and demand — it does not require any affirmative act by the IRS. Under § 6322, this lien generally arises at the time of assessment. The NFTL is filed under § 6323 to make the lien effective against certain third parties, not to create the underlying lien.

As for the date dispute: whether the NFTL was filed on October 20 or October 24, the CDP Notice issued on October 24 fell within five business days of either date, satisfying § 6320(a)(2). The certified mail tracking number corroborated mailing. And — critically — Novak's own timely CDP request destroyed his claim of non-receipt. You cannot simultaneously claim you never received a notice and file a timely hearing request triggered by that exact notice. The Court cited Kelly v. Commissioner, Stein, and Call v. Commissioner.

2. The IRS Was Authorized to File the Lien While the Installment Agreement Was Pending

The Court found Novak likely waived this issue by failing to raise it on his Form 12153 — a significant procedural lesson. But even on the merits, the argument collapsed. The Internal Revenue Manual at IRM 5.14.1.4(11) and related sections expressly permits — and indeed encourages — filing an NFTL to protect the government's collection priority while an installment agreement request is pending, so long as the formal rejection has not yet been communicated. The revenue officer followed IRM protocol. Per the Court, "it is generally not an abuse of discretion to follow IRM guidelines."

The Court also noted that Novak had a remedy available to him that he never pursued: requesting a lien withdrawal under § 6323(j)(1)(C) by submitting Form 12277. A lien withdrawal — unlike a mere lien release — removes the public NFTL from the record, as if it were never filed. He passed that up entirely. For a deeper look at lien withdrawal strategy, our tax resolution services page covers this and related tools.

3. Three Months Was More Than Enough Time

There is no statutory minimum time the IRS must allow a taxpayer to gather documentation, the Court held, citing Scanlon, Shanley v. Commissioner, and Treasury Regulation § 301.6320-1(e)(3), Q&A-E9. Novak received multiple extensions, nearly three months total, and produced nothing. It is not an abuse of discretion for Appeals to proceed after giving a taxpayer substantial time to respond and receiving nothing in return.

4. The Installment Agreement Was Properly Rejected (§ 6159(a))

This is the heart of the case. Installment agreements are entirely discretionary under § 6159(a) and Treasury Regulation § 301.6159-1(a). The IRS is not obligated to accept a payment plan. The Court cited two independent grounds for rejection: first, Scanlon holds that Appeals may properly reject an installment agreement when a taxpayer's own financial statements show the ability to pay by liquidating assets; second, Orum v. Commissioner, 123 T.C. 1, holds that Appeals may also reject when the taxpayer fails to provide requested financial documentation.

Both applied here. Novak's own financial statement showed real property equity exceeding his total liability. His claim that the $60 million in stock was illiquid was undercut by his own proposal to sell the business in March 2024 — a plan that, by definition, implied the assets could be monetized. And he provided not a single document to support any of his claimed changed circumstances.

5. Balancing Was Adequate Under § 6330(c)(3)(C)

The Court found that the AO properly weighed collection efficiency against the intrusiveness of the lien filing. Given Novak's documented net worth, his failure to provide any substantiating documentation, and the substantial time given to do so, sustaining the NFTL was a proportionate response — not an excessive one. For context on how hardship arguments factor into IRS resolution, see our guide to Offer in Compromise eligibility and the financial analysis the IRS uses.

Key Code Sections Referenced in This Decision

• § 6159(a) — Authorizes installment agreements; discretionary, not a taxpayer entitlement
• § 6320 — CDP hearing rights upon NFTL filing; five-business-day notice requirement under § 6320(a)(2)
• § 6321 — Federal tax lien arises automatically upon failure to pay after notice and demand
• § 6322 — Lien arises at the time of assessment
• § 6323(j)(1)(C) — IRS may withdraw an NFTL when withdrawal will facilitate collection (Form 12277)
• § 6330(c)(3)(C) — Balancing requirement: collection action must be no more intrusive than necessary
• Treas. Reg. § 301.6320-1(f)(2), Q&A-F3 — Issues not raised at CDP hearing are generally barred from Tax Court review

What This Means For You

Whether you owe $17,000 or $1.7 million, Novak v. Commissioner delivers lessons that apply to any taxpayer dealing with IRS collection:

• Document your changed circumstances — or lose the argument. If you claim your financial situation has deteriorated since your last financial statement, you must prove it. Bank statements. Brokerage records. Loan agreements. Proof of asset liquidation. The IRS is not required to take your word for it, and the Tax Court will not require them to. "My circumstances changed" without documentation is equivalent to saying nothing at all.
• Requesting an installment agreement does not freeze IRS collection. Many taxpayers assume that submitting Form 9465 puts everything on hold. It does not. The IRS can file a Notice of Federal Tax Lien while your request is pending — and the Tax Court has now confirmed again that this is entirely lawful. Plan accordingly.
• Your Form 12153 is your legal filing — treat it seriously. Under Treasury Reg. § 301.6320-1(f)(2), issues not raised at the CDP hearing are generally waived and cannot be raised later in Tax Court. Novak's failure to challenge the lien timing on his Form 12153 almost certainly cost him that argument. Every objection you intend to make must appear in that form.
• Lien withdrawal is a powerful tool most taxpayers never use. Even after an NFTL is filed, a taxpayer who enters a Direct Debit Installment Agreement may qualify for lien withdrawal under § 6323(j)(1)(C) using Form 12277. A withdrawal removes the public NFTL entirely — restoring your credit profile in a way that a simple lien release does not. This tool goes unused far too often.
• High asset values make installment agreements harder to get, not easier. Novak's wealth worked against him. The IRS's baseline rule is simple: if you have assets sufficient to satisfy the liability, you should liquidate and pay. Overcoming that presumption requires a well-documented strategy — a carefully structured installment agreement backed by full financial disclosure, or potentially an Offer in Compromise if the asset values are more complicated than they appear. That work must be done proactively, before the CDP hearing closes.
• The CDP hearing is your most important tactical opportunity. After the CDP hearing concludes and judicial review defaults to abuse-of-discretion scrutiny, your options narrow dramatically. Use the hearing window — submit all documentation, raise every procedural objection, and consider every available collection alternative. Do not arrive unprepared and do not miss the deadline to request a hearing in the first place.

Act Before Your Deadline Expires

A Notice of Federal Tax Lien damages your credit score, clouds the title to your real property, and signals that the IRS may be preparing to levy your wages, bank accounts, or other assets. But the lien is not the final word — it is a warning, and the CDP process gives you a formal opportunity to fight back, negotiate, and protect your assets.

If you have received a Notice of Deficiency, you have only 90 days to petition the U.S. Tax Court — miss that deadline and you permanently forfeit your right to pre-payment judicial review of your tax liability. If you have received a CDP Notice following an NFTL filing or proposed levy, you have a similarly strict window to request a Collection Due Process hearing. These deadlines are absolute, and courts do not grant extensions for missing them.

Contact Brightside Tax Relief today for a confidential consultation. Our team handles IRS audits, CDP hearings, federal tax liens, lien withdrawals, installment agreements, and Tax Court petitions nationwide. If you have received any IRS collection notice, call us before your deadline runs — the time to act is always now, not later.