Your Guide to Federal Tax Lien Removal

By Kelly Hanley, Esq., Tax Attorney

A federal tax lien is the government’s legal claim against a taxpayer’s property when they neglect or fail to pay a tax debt. It can have far-reaching implications on your personal, professional, and financial life, making federal tax lien removal a top priority for many individuals and businesses. In this comprehensive guide, we will explore strategies for federal tax lien removal, explain its importance, and provide actionable tips for achieving success in the removal process.

The Importance of Federal Tax Lien Removal

A federal tax lien can significantly impact your life in various ways, including:

Credit Score: A federal tax lien on your credit report can lower your credit score, making it difficult to secure loans, mortgages, or lines of credit.
Asset Sale: Tax liens can impede the sale of property, as potential buyers may be reluctant to purchase property with an outstanding lien.
Business Operations: For small business owners, tax liens can limit the ability to obtain financing, potentially stalling business growth.

Understanding Tax Regulations and Guidelines for IRS Lien Release

The Internal Revenue Service (IRS) outlines several methods for federal tax lien removal, including:

Paying the Tax Debt in Full: The IRS will release the lien within 30 days after full payment is received.
Offer in Compromise: A negotiated agreement between the taxpayer and the IRS to settle the tax debt for less than the full amount owed.
Discharge of Property: In specific circumstances, the IRS may grant a discharge, removing the lien from a particular property.
Subordination: The IRS may allow other creditors to move ahead of the federal tax lien, making it easier for the taxpayer to obtain financing.
Withdrawal: The IRS may withdraw the tax lien, removing it from the public record.

Actionable Tips for Federal Tax Lien Removal

Consult a Tax Professional: Working with an experienced tax attorney or resolution expert can help you navigate the complexities of tax lien removal.
Stay Compliant with Tax Filings: Ensure you are up-to-date on all tax filings and continue to file and pay taxes on time.
Communicate with the IRS: Establishing open communication with the IRS can help you understand your options and work towards a resolution.

Case Studies and Examples

Successful Offer in Compromise: John, a small business owner, settled a $50,000 tax debt for $10,000 through an Offer in Compromise, resulting in the removal of the federal tax lien.
Withdrawal after Installment Agreement: Sarah, a freelance professional, negotiated an installment agreement with the IRS to pay off her tax debt over time. The IRS agreed to withdraw the tax lien after she made several payments.

Quantifiable Results for a Certificate of Release of a Federal Tax Lien

Research indicates that taxpayers who proactively address their tax liens can significantly improve their financial standing. For example, individuals who resolve their tax liens see an average credit score increase of 35-40 points within two years.

Step-by-Step Process for Removing a Federal Tax Lien from the Public Record

Evaluate your tax situation and seek professional guidance.
Determine the most suitable method for lien removal (e.g., full payment, Offer in Compromise, etc.).
Submit required documentation and applications to the IRS.
Maintain open communication with the IRS and monitor your case’s progress.
Once the lien is resolved, request a lien release or withdrawal from the IRS.
Verify that the lien release or withdrawal is reflected in public records and on your credit report.

Resources and Tools

To help you navigate the federal tax lien removal process, consider utilizing the following resources and tools:

IRS.gov: The official IRS website offers comprehensive information on tax lien removal, including forms, guidelines, and procedures. Visit their Tax Lien page (https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien) for more information.
Tax Professionals: Engaging a qualified tax attorney or resolution expert can significantly increase your chances of successful lien removal. These professionals have experience navigating IRS policies and can provide tailored advice for your situation.
Taxpayer Advocate Service (TAS): The TAS (https://www.taxpayeradvocate.irs.gov/) is an independent organization within the IRS that provides assistance to taxpayers who are experiencing financial difficulties or who need help resolving problems with the IRS.
IRS Offer in Compromise Pre-Qualifier Tool: Use this online tool (https://irs.treasury.gov/oic_pre_qualifier/) to determine if you may be eligible for an Offer in Compromise and to estimate an appropriate offer amount.
Credit Monitoring Services: Regularly monitoring your credit report can help you track the progress of your tax lien removal and ensure the lien release or withdrawal is accurately reflected in your credit report.
Tax Law Resources: Familiarize yourself with tax laws and regulations by referring to resources such as the Internal Revenue Code, tax law blogs, and publications by reputable tax organizations.

Conclusion: Getting help to file a federal tax lien release

Federal tax lien removal can be a complex but crucial process for taxpayers. By understanding the importance of lien removal, staying informed about tax regulations and guidelines, and employing the strategies outlined in this guide, you can successfully navigate the federal tax lien removal process. With persistence and the right resources, you can work towards resolving your tax debt and improving your personal, professional, and financial situation.

Seeking professional help can greatly improve your chances of successful tax lien removal. Call the experienced tax attorneys at The Tax Defenders today for a FREE attorney consultation. With their expertise, they can provide personalized guidance and support throughout the lien removal process. Don’t hesitate to reach out to them at 312-345-5440 and take the first step towards resolving your tax issues today.

How do I get an IRS lien removed after the statute of limitations?

If a federal tax lien remains on your record after the statute of limitations has expired, you can take the following steps to have the lien removed:

Verify the expiration of the statute of limitations: The IRS generally has 10 years from the date of assessment to collect the tax debt. Confirm that the 10-year period has indeed passed by reviewing your tax records, including the assessment date of the tax liability.
Gather supporting documentation: Collect any relevant documents, such as tax transcripts, payment records, and correspondence from the IRS, to support your claim that the statute of limitations has expired.
Contact the IRS: Reach out to the IRS to inform them that the statute of limitations for the tax debt has expired. You may call the phone number listed on your tax lien notice or contact your local IRS office. Explain your situation and provide the necessary documentation to substantiate your claim.
Request a lien release: If the IRS confirms that the statute of limitations has expired, request a Certificate of Release of Federal Tax Lien (Form 668(Z)). The IRS should release the lien within 30 days after determining that the tax debt is no longer legally enforceable.
Monitor your credit report: Once you receive the Certificate of Release, ensure that the lien release is accurately reflected on your credit report. You may need to send a copy of the certificate to the credit bureaus to have the tax lien removed from your record.

In some cases, it may be helpful to consult a tax professional, such as a tax attorney or resolution expert, to guide you through the process and ensure that your rights are protected.

Can a tax lien be removed from my credit report?

Yes, a tax lien can be removed from your credit report. There are several ways to achieve this:

Pay the tax debt in full: If you pay the tax debt in full, the IRS will release the tax lien within 30 days. After the lien is released, you can provide the credit bureaus with a copy of the Certificate of Release of Federal Tax Lien (Form 668(Z)) to have the tax lien removed from your credit report.
Withdrawal of the tax lien: The IRS may agree to withdraw the tax lien under certain circumstances, such as entering into a Direct Debit Installment Agreement. When the IRS withdraws the lien, it removes the lien from the public record. You should submit a copy of the Notice of Federal Tax Lien Withdrawal (Form 10916) to the credit bureaus to update your credit report.
Offer in Compromise: If you negotiate an Offer in Compromise with the IRS and they accept it, the lien will be released upon payment of the agreed-upon amount. You can then request the credit bureaus to remove the tax lien from your credit report.
Expiration of the statute of limitations: If the 10-year statute of limitations for tax debt collection expires, the IRS should release the tax lien. You can request the credit bureaus to remove the lien from your credit report by providing documentation proving the lien’s expiration.
Dispute inaccuracies: If the tax lien on your credit report is incorrect or invalid, you can file a dispute with the credit bureaus. They are required to investigate the dispute and remove any inaccuracies within 30 days.

Monitor your credit report to ensure that the tax lien removal is accurately reflected. Removing a tax lien can improve your credit score and make it easier to secure credit or loans in the future.

Will the IRS remove a lien with a payment plan?

The IRS does not automatically remove a lien when you enter into a payment plan or installment agreement. However, they may consider a lien withdrawal under specific circumstances, particularly if you enter into a Direct Debit Installment Agreement (DDIA).

A Direct Debit Installment Agreement allows you to make monthly payments automatically from your bank account. This type of agreement gives the IRS more assurance that you’ll consistently make payments, which may make them more willing to withdraw the tax lien.

To request a lien withdrawal after entering into a Direct Debit Installment Agreement, you can follow these steps:

Ensure you are eligible: You must be current on your tax filings and have a balance of $25,000 or less to qualify for a lien withdrawal under a Direct Debit Installment Agreement.
Complete Form 12277: Fill out the Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien (Form 12277). In the “Reason for Withdrawal Request” section, mention that you have entered into a Direct Debit Installment Agreement.
Submit Form 12277: Mail the completed form to the IRS at the address provided in the instructions. The IRS will review your application and determine if you meet the criteria for a lien withdrawal.
Monitor your credit report: If the IRS approves your lien withdrawal request, they will send you a copy of the Notice of Federal Tax Lien Withdrawal (Form 10916). Provide this notice to the credit bureaus to have the lien removed from your credit report.

Keep in mind that the IRS’s decision to withdraw a tax lien is not guaranteed and is made on a case-by-case basis. It is essential to maintain regular payments under your DDIA and comply with tax filing requirements to improve your chances of a successful lien withdrawal.

What is a tax lien on a house, home, or other property?

A tax lien on a house, home, or other property is a legal claim placed by a taxing authority (federal, state, or local) against a property due to the owner’s unpaid tax obligations. The lien serves as a security interest, ensuring that the taxes are paid before the property is sold or refinanced. Tax liens can be placed on various types of properties, including residential homes, commercial buildings, and land.

There are several types of tax liens that can be placed on a property:

Federal tax lien: If a taxpayer fails to pay federal back taxes (such as income tax), the IRS may file a Notice of Federal Tax Lien, which becomes a public record and attaches to all of the taxpayer’s current and future property, including real estate.
State tax lien: If a taxpayer owes state back taxes (such as income tax, sales tax, or property tax), the state government may file a state tax lien against the taxpayer’s property.
Property tax lien: When a property owner fails to pay their property back taxes, the local government (county or municipality) can place a property tax lien on the property. In some cases, the local government may even sell the tax lien to investors through a tax lien sale.

A tax lien on a property can have significant consequences for the property owner:

Difficulty selling or refinancing: A tax lien can make it challenging to sell or refinance the property since most buyers and lenders require a clear title before closing the transaction. The lien must be satisfied (paid off) before the property can be sold or refinanced.
Decreased property value: Tax liens can decrease a property’s value, as potential buyers may be deterred by the need to satisfy the lien before taking ownership.
Forced sale or foreclosure: In some cases, the taxing authority may initiate a forced sale or foreclosure of the property to collect the unpaid taxes. In such a case, the authority usually issues a Notice of Intent to Levy first.
Credit damage: Tax liens can be reported to credit bureaus, which can negatively impact the property owner’s credit score.

To avoid the consequences of a tax lien, be sure to pay taxes on time and address any tax debts promptly. If a tax lien is already in place, working with the taxing authority to set up a payment plan or negotiating a settlement can help resolve the lien and protect your property.

What is a tax lien and what does it mean?

A tax lien is a legal claim placed by a government authority (federal, state, or local) on a taxpayer’s property and assets due to unpaid tax obligations. This claim serves as a security interest, ensuring that the unpaid taxes are settled before the taxpayer can sell, refinance, or transfer ownership of the property or assets. Tax liens can be placed on various types of assets, including real estate, personal property, and financial assets.

When a tax lien is filed, it generally becomes a matter of public record, which can negatively impact the taxpayer’s credit score and overall financial standing. Having a tax lien means:

Difficulty selling or refinancing property: Tax liens make it difficult to sell or refinance property, as most buyers and lenders require a clear title before closing a transaction. The lien must be paid off or resolved before the property can be sold or refinanced.
Impaired access to credit: A tax lien on your credit report can make it challenging to obtain loans, credit cards, or other forms of credit, as lenders may see the lien as a sign of financial irresponsibility.
Increased borrowing costs: If you’re able to secure credit, you may face higher interest rates due to the perceived increased risk associated with lending to someone with a tax lien.
Claim on future assets: A tax lien can attach not only to your current assets but also to future assets you acquire while the lien is in place.
Forced sale or seizure of assets: In some cases, the government authority may initiate a forced sale or seize assets to collect the unpaid taxes (sometimes called a levy).

To avoid the consequences of a tax lien, pay taxes on time and address any tax debts promptly. If a tax lien is already in place, you can work with the taxing authority to set up a payment plan, negotiate a settlement, or explore other resolution options to resolve the lien and protect your assets.

How long can an IRS tax lien last?

An IRS tax lien can last as long as the tax debt remains unpaid or unresolved. However, the IRS generally has 10 years from the date of tax assessment to collect the debt, which is known as the Collection Statute Expiration Date (CSED). Once the 10-year statute of limitations expires, the IRS loses its legal claim to levy or collect the debt, and the tax lien should be released.

It is important to note that certain actions or events can extend the 10-year statute of limitations, such as:

Filing an Offer in Compromise: If you submit an Offer in Compromise to the IRS, the statute of limitations is suspended while the offer is being reviewed and during the 30 days after the IRS makes a decision on your offer.
Bankruptcy: The statute of limitations is suspended during bankruptcy proceedings and for an additional six months after the bankruptcy case is closed.
Collection Due Process (CDP) hearing: If you request a CDP hearing, the statute of limitations is suspended from the date you request the hearing until the final resolution of the hearing.
Installment agreements: The statute of limitations is suspended while an installment agreement is in effect and for an additional 90 days after the agreement’s termination.

To ensure that a tax lien is released after the statute of limitations expires, you should monitor the Collection Statute Expiration Date and contact the IRS if the lien is not released automatically. Additionally, it’s crucial to consult with a tax professional to understand how your specific situation may impact the statute of limitations and the duration of the tax lien.