An IRS tax lien is a claim against property or assets of a taxpayer that is used to ensure that any money made from the property or assets is applied to the taxpayer’s outstanding tax debt. A tax lien is one of the most aggressive forms of collection action that the IRS can take. Once a tax lien has been filed, tax lien removal may be pursued if it can be proven that the IRS was unjustified in placing the lien, although it can be a difficult process to have a tax lien removed.
Since tax liens can dramatically affect your credit rating, it is important to ensure that tax liens are removed from your credit reports as soon as possible. Lower credit ratings can make it difficult to buy a home or a car, qualify for a loan, enter into a lease or obtain credit cards. Of course, it is best to avoid having a tax lien filed against you in the first place (see below for ways to avoid a tax lien).
What are some of the reasons that tax lien removal may be pursued?
A taxpayer may apply for a Discharge of a Federal Tax Lien for the following reasons:
- The tax lien was filed incorrectly or in error.
- The tax debt has already been paid in full.
- The tax was wrongly assessed and the taxpayer was not given the opportunity to dispute the amount.
- The taxpayer had filed bankruptcy prior to the tax lien being filed.
- The taxpayer claims they are an Innocent Spouse (the spouse should be liable for the tax lien).
- The taxpayer can prove that they will pay the tax debt faster with removal of the lien.
- The taxpayer meets qualifications under the Fresh Start Initiative.
- The statute of limitations of collecting the tax debt has passed (10 years).
How can a tax lien be removed?
Tax lien appeal – You can request a Collection Due Process hearing to appeal a tax lien, but the request for an appeal must be made within thirty (30) days from the fifth day after the lien is filed, or by the date indicated on the lien notice.
Tax lien withdrawal – Withdrawal of a tax lien is desired by taxpayers because it removes any record of the tax lien on credit reports, as if it was never there. Withdrawal of a tax lien may occur if it is proven that the lien was filed falsely or the debt is paid off in full. Taxpayers who qualify for the Fresh Start Initiative, have entered into a direct debit agreement to pay off their outstanding debt, and have a balance less than $25,000, may also have their lien withdrawn.
To request a tax lien withdrawal, a formal request must be made using IRS Form 12277, and if the IRS approves the withdrawal request, the taxpayer will receive IRS form 10916(c), which will clear the tax lien from any credit reports. State tax liens cannot be withdrawn, however, and will still appear on public records. Tax settlements (Offers in Compromise) are only eligible for a lien release, rather than a lien withdrawal, since the settlement is less than the full tax actually owed and is therefore not a tax repayment in full.
Tax lien release – A tax lien that has been released is no longer attached to your property or assets, but will remain on public records and your credit report for up to ten (10) years following tax debt repayment. You can obtain a tax lien release if you qualify for the Fresh Start Initiative and your balance is less than $25,000 or you have arranged a streamlined installment agreement or paid the tax debt in full. Even without a formal request, your lien will be released after thirty (30) days following these conditions. Once you receive confirmation of the release,, you can ask credit reporting agencies to update your records.
Tax lien subordination – This process allows another creditor to move ahead of the IRS when it comes to the claim they have on your property or assets. The only way the IRS will allow this to happen is if doing so will allow them to get paid sooner (such as in refinancing a home where they get a portion of the funds). Requesting tax lien subordination is a complicated process, however.
How can a tax lien be avoided?
Of course, the easiest way to avoid having a tax lien filed against you is to pay your taxes on time and in full. But even if you can’t do that, there are things you can do that will make it less likely that the IRS will file a tax lien that you’ll need to have removed, including:
- If you can’t pay your taxes on time, file an extension.
- Respond quickly to any notices from the IRS so they don’t think you’re trying to avoid paying your debt. Do not ignore notices they send.
- Keep all records related to your tax status in a safe, secure and accessible place.
- Contact the IRS right away if you think a tax lien was filed in error.
- Negotiate an installment plan with the IRS if you can’t pay your tax debt in full, and then stick to the payment schedule.
If you are looking for ways to avoid having a tax lien filed against you or you need assistance in tax lien removal once the lien has already been filed, it is best to speak to an experienced tax relief professional to find out what your options are. Tax resolution specialists will be able to provide you with advice on how to have your lien released, if possible.
Have You Received a Notice of Federal Tax Lien? Contact Us Today!
If you have received a Notice of Federal Tax Lien (an IRS tax lien) and need help in having it removed, call People’s Tax Relief for a free, no-obligation tax consultation at 888-618-0593 or fill out the form on the side of this page and one of our experienced tax specialists will contact you. During this consultation, we will advise you of your options in removing the tax lien so you can maintain your credit health.