Tax Lien Release

IRS Tax Lien Release: What to Do If You Have a Tax Lien Against Your Assets

There are a few different ways to get a tax lien removed from your record:

• Release – removes (releases) the tax lien from your property.
• Withdrawal – removes all public notice of the lien, after it’s been released.
• Discharge – releases the lien from specific property.
• Subordination – gives another creditor priority over the IRS’s tax lien.

Keep reading for more details on each of these options. Or contact us at The W Tax Group today and we’ll help you get your lien released.

How to Get Your Lien Released

A lien release removes the lien from your assets, but the lien may continue to exist on the public record until it’s withdrawn. Here are some of the ways to get a lien release.

• Pay off Your Tax Liability – Generally, you need to pay your tax liability in full to get the lien released, but if you qualify for an offer-in-compromise to settle for less than owed, the IRS will also release the lien. 
• Set Up a Payment Plan with Direct Debit – If you owe $25,000 or less, set up a payment plan with direct debit from your bank account, and can pay off the balance within 60 months, the IRS will release the lien once you make three on-time monthly payments. 
• Prove the Lien Is Preventing You from Paying – Prove that the lien is preventing you from paying. For example, show that if the IRS releases the lien, you can take out a loan against an asset and use that to pay your tax debt.
• Request a Discharge from Specific Property – If you pursue this option, the lien will continue to exist and be attached to the rest of your property, but it will not be attached to that particular piece of property. To apply for a discharge, use Form 14135 (Application for Certificate of Discharge of Property from Federal Tax Lien).
• Ask for Lien Subordination – A lien subordination is when the IRS agrees to take a backseat to other creditors – generally, that’s so that you can take out a loan against a particular asset. To apply for a lien subordination, use Form 14134 (Application for Certificate of Subordination of Federal Tax Lien). 

In addition to getting the lien released from your assets, you may also want it withdrawn from the public record. Read on to learn how that happens.

How to Withdraw a Federal Tax Lien

Again, a lien release removes the lien from your assets, but a lien withdrawal removes the public record of the lien. If the lien has been released, you can apply for a withdrawal if you meet these criteria:

• You have satisfied the tax liability.
• You have filed all required returns for the last three years.
• You are current on all estimated tax payments and deposits.

As indicated above, you can also get a lien withdrawn after you set up a direct deposit installment agreement if you meet the other requirements.

To apply for a lien withdrawal, use Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien). Generally, it takes the IRS 30 days to withdraw the lien after you pay in full.

Lien Withdrawal for IRS Mistakes

You can also get a lien withdrawn from the public record if the IRS made a mistake. Here are some of the procedural errors that can lead to an incorrect lien filing:

• An IRS employee knows that you have a carryback, overpayment, or adjustment that will cover the unpaid taxes, but they still filed the federal tax lien.
• The IRS filed the lien while a stay was in place due to a bankruptcy case.
• The IRS filed the lien while you were in a combat zone, on a contingency mission, or hospitalized due to serving in a combat zone.
• The lien was filed after the collection statute expiration date – aka the date the tax debt effectively expires.
• The IRS filed the lien for a shared responsibility payment due to not having health insurance.
• The lien was a duplicate.
• The lien was supposed to be in somebody else’s name.

Unfortunately, a mistaken lien will generally not go away on its own. You will have to reach out to the IRS and explain the mistake that was made. If you receive a notice about the lien, it should have instructions on how to appeal.

What the IRS Considers When Removing Federal Tax Liens

The IRS considers several factors when deciding to release or withdraw federal tax liens. 

Tax collection – First and foremost, the agency considers if a tax lien release or withdrawal will help you pay your taxes. If releasing the lien will only cover part of your tax liability, the IRS tries to make sure that the lien release will not compromise the ability to collect the rest of the balance.

Your history of compliance – When considering a lien withdrawal, the IRS wants to see a pattern of compliance. Your chances will be lower or non-existent if you’re behind on other filing or payment obligations. 

Your risk of bankruptcy – The agency will also consider if the lien is likely to drive you toward bankruptcy. If so, the IRS considers whether bankruptcy will make you more or less likely to pay.

Why the lien was issued – The IRS also considers the reasons the lien was placed. For instance, if the lien was due to defaulting on a payment agreement, the agency will be less likely to approve a lien withdrawal based on a direct debit installment agreement.

If the IRS can achieve the same effect with a lien discharge or release, it will generally select those options over a withdrawal.

How Federal Tax Liens Affect Your Credit

As of 2018, the IRS no longer updates the credit reporting bureaus about federal tax liens. That means that liens don’t appear on your credit report, but they are still public record. Before offering loans, creditors typically request a Risk View Liens and Judgments Report from LexisNexis, and then, they can see any of your liens. This can severely compromise your ability to obtain loans or credit.

Will the IRS Seize Assets If the Lien Is Not Released?

Not necessarily. A lien secures the government’s interests in your assets. It also creates the legal groundwork for the IRS to seize your assets. But before seizing assets, the agency must send you a Final Notice of Intent to Levy and provide you the opportunity to request a Collection Due Process (CDP) hearing.

Get Help with Federal Tax Lien Release

Getting a lien release or withdrawal requires some finesse, and for best results, you should work with a tax lien attorney. You need to ensure you’re compliant with current tax obligations, file the right paperwork, and potentially negotiate with the IRS.

You don’t have to deal with the IRS on your own. We can help you — let’s talk. To learn more, contact us at The W Tax Group today.

Lead Tax Attorney at The W Tax Group

Stephen A Weisberg