A taxpayer who has a lien from the IRS may question how to remove the IRS lien. A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. In addition, a lien is a legal claim against your property to secure payment of your tax debt, while a levy actually takes the property to satisfy the tax debt.
A federal tax lien comes into being when the IRS assesses a tax against you and sends you a bill that you neglect or refuse to pay it. Moreover, the IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property. You have the right to appeal if the IRS advises you of the intent to file a Notice of Federal Tax Lien. Your IRS Collection Due Process appeal rights are explained in IRS Publication 1660, Collection Appeal Rights PDF (PDF).
When filed, the Notice of Federal Tax Lien is a public document that alerts other creditors that the IRS is asserting a secured claim against your assets. Credit reporting agencies may find the Notice of Federal Tax Lien and include it in your credit report. An IRS levy is not a public record and should not affect your credit report. An IRS lien may be the result of filing a tax return without paying, an IRS audit assessment, or Tax Court litigation.
How to Get Rid of an IRS Lien
After paying your tax debt – in full – the IRS will release your lien within 30 days after you have paid your tax debt.
If you cannot fully pay your IRS tax debt, the IRS will release the lien when certain conditions are met. When conditions are in the best interest of both the government and the taxpayer, other options for reducing the impact of a lien exist.
Discharge of property
A “discharge” removes the lien from specific property. There are several Internal Revenue Code (IRC) provisions that determine eligibility. For more information, refer to Publication 783, Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien PDF and the video Selling or Refinancing when there is an IRS Lien.
“Subordination” does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage. To determine eligibility, refer to Publication 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien PDF and the video Selling or Refinancing when there is an IRS Lien.
A “withdrawal” removes the public Notice of Federal Tax Lien and assures that the IRS is not competing with other creditors for your property; however, you are still liable for the amount due. For eligibility, refer to Form 12277, Application for the Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (Internal Revenue Code Section 6323(j)) PDF and the video Lien Notice Withdrawal.
Two additional Withdrawal options resulted from the Commissioner’s 2011 Fresh Start initiative.
One option may allow withdrawal of your Notice of Federal Tax Lien after the lien’s release. General eligibility includes:
Your tax liability has been satisfied and your lien has been released; and also:
- You are in compliance for the past three years in filing – all individual returns, business returns, and information returns;
- You are current on your estimated tax payments and federal tax deposits, as applicable.
The other option may allow withdrawal of your Notice of Federal Tax Lien if you have entered in or converted your regular installment agreement to a Direct Debit installment agreement. General eligibility includes:
- You are a qualifying taxpayer (i.e. individuals, businesses with income tax liability only, and out of business entities with any type of tax debt)
- You owe $25,000 or less (If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting withdrawal of the Notice of Federal Tax Lien)
- Your Direct Debit Installment Agreement must full pay the amount you owe within 60 months or before the Collection Statute expires, whichever is earlier
- An you are in full compliance with other filing and payment requirements
- You have made three consecutive direct debit payments
- You can’t have defaulted on your current, or any previous, Direct Debit Installment agreement.
If the IRS has asserted a lien against you, contact a tax lawyer today to discuss how to remove the IRS lien.