Tax Lien Release
Tax Lien Release
Tax Lien Release

A federal tax lien from the IRS is bad news. It means an individual has defaulted on their taxes, and the IRS has claim on that individual’s assets, including money, home, an automobile, or about anything else that you own. For many, the words ‘tax lien’ is the most terrifying phrase in the English language

The phrase tax lien release – despite containing those two terrifying syllables – is actually a cause for celebration, once you understand what they mean, and what to do them.

Understanding Tax Liens

To understand fully the function of a tax lien, first we must fully comprehend what a tax lien is, and what it does.

A tax lien is a legal claim from an official government entity taking action against a taxpayer’s assets who has failed to pay their taxes. Liens are a last ditch effort, forcing an individual or organization to pay the back taxes they owe. To have a lien withdrawn, the noncpompliant taxpayer must pay what they owe, getting the debt dismissed in bankruptcy court, or negotiate with the IRS for an offer in compromise. Governments may place liens for errant state or federal income taxes, while local governments may place liens for local income or property taxes.

This means that the IRS has legal claim to every single asset, as well as future income, until the lien has been released

As always, tax liens are best to be avoided, if at all possible. If you have not yet defaulted on your taxes, it is in your best interest to work something out, usually in the form of an agreement with the IRS

The two most common forms of agreements with the IRS are:

  • The guaranteed installment agreement is for taxpayers that owe maximum $10,000,
  • The streamlined installment agreement entertains people with $25,000 or less tax debt.

Installment agreement options are usually more feasible than the other prior methods.

How To Have A Tax Lien Released

In the off chance that, due to extenuating circumstances, the IRS placed a tax lien against your property, you will have to go about having a tax lien released, once your back taxes are back in good standing.

The first, and most common, way to have a tax lien released is by paying your back taxes, in full. The IRS will release your tax lien after 30 days from receiving your payment.

Some other forms of tax lien release exist, including:

  • Discharge Of Property:
    Sometimes, when it is in the best suits both parties, the IRS will allow for an exemption on certain pieces of property, for the purpose of selling or refinancing. To find out more, refer to Instructions on How to Apply for Certificate of Discharge From Federal Tax Lien and this video on selling or refinancing
  • Subordination:
    Subordination does not withdraw the lien, but allows other creditors to take precedent, before the IRS, which may make obtaining a mortgage or personal loan easier.
  • Withdrawal:

A withdrawal removes the Notice of Federal Tax Lien from your public record and makes sure that the IRS is not in competition with other creditors for your property. You are still liable for the amount due, however.

Release Versus Withdrawal: Which Is Preferable?

A withdrawal is not the same as a release, although they are involved with one another. A release means the tax dispute has been resolved. A withdrawal means credit agencies delete any reference to the tax lien when they see it.

Some causes for withdrawal include:

  • Filing of the Notice of Federal Tax Lien was hasty or not in accordance with the IRS’s procedures.
  • The non-compliant individual has entered into an agreement to pay on an installment plan, satisfying the debt that brought about the lease.
  • Withdrawal facilitates the collection of the tax liability.
  • When the taxpayer or the National Taxpayer Advocate gives consent, the withdrawal of the NFTL would be in the best interests of the taxpayer and the United States.

Obviously, a withdrawal is preferable to a release, particularly for small business owners, or when obtaining a loan.

Remember, if your tax lien has not been withdrawn, it will fall off your credit report after the statue of limitation has expired, in seven years’ time.

Dealing With A Tax Lien Release

There are numerous ways to get a tax lien released, even if you are not yet in a position to pay back your taxes fully. There are more ways than ever before, in fact, after the IRS issued a series of initiative to help get taxpayers back on their feet. A trained tax professional can negotiate with the IRS for a variety of solutions, including:

  • Direct Debit Installment Agreement (DDIA)
  • IRS didn’t file correct procedures
  • Offer A Compromise
  • Partial payment installment agreement
  • Currently not collectible

To learn more about how our tax professional can help with your tax lien release, contact us today.