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Getting an IRS Tax Lien Released
Table of Contents for IRS Tax Lien Release (click to navigate):
Option 1--Balance Less than $25,000 and Payment Plan
How can I get a Federal Tax Lien removed? What are my options?
Option #1--Recently Approved IRS Policy
The IRS recently approved new rules to assist struggling Taxpayers due to the economic recession. The new rules state that the IRS will withdraw tax liens that are filed against Taxpayers who meet certain criteria.
Specifically, if you owe less than $25,000 to the IRS and enter into a payment agreement the IRS will withdraw the lien. Before the IRS will do so, you must agree to have your monthly payments directly debited from your bank account each month. Additionally, the IRS will not withdraw the lien until a few payments have successfully been made through that direct debit authorization, so that they know you are operating in good faith.
Option #2--Full Pay Balance
The first way, obviously, is to pay the IRS the amount of back tax due on the lien. This can be via an IRS Payment Plan or through full payment. Federal Tax Liens come out by tax period so you may owe more than what is on the lien. You must be careful to ensure that your payment is applied to the period under federal tax lien or you could end up sending a big payment and still having a Federal Tax Lien.
NOTE: it may be that paying the lien is not the best use of your money, especially if you know another IRS tax lien is on the horizon. This is a situation where professional guidance is essential and could save you thousands if not hundreds of thousands of dollars. In fact in some instances, like when a corporation receives a Federal Tax Lien or the Statue of Limitations to collect a tax debt is near, it may well be the worst use of your money.
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Option #3--Subordination of Lien
IRS Tax Lien Discharge or IRS Tax Lien Subordination. Basically, you request the IRS to release or subordinate (allow another secured creditor to move ahead of the IRS) their interest. The IRS will only approve these requests if it is in their best interests, i.e., they get paid more or sooner. For instance if you have a home with equity they may subordinate their IRS Tax Lien to a lender who refinances the property in exchange for a piece of the proceeds. Even experienced tax attorneys and CPA's struggle with this process so professional guidance is strongly recommended.
Option #4--IRS Settlement
Make a settlement with the IRS and then pay the settlement. Sounds simple but the IRS does not engage in “Lets Make a Deal” so to reach a settlement with the IRS you must go through their “settlement” programs. These are the Offer in Compromise and the Penalty Abatement Request all of which are discussed at length on each page.
Option #5--Expiration of Collection Statute
Wait for the Collection Statute Expiration Date to pass and the Federal Tax Lien will self-release or, more accurately, it should self-release. In practice you will probably still need to call the IRS to obtain copies of the release documents, ensure that they are filed with the proper county recorder's office, and notify the credit bureaus yourself. The IRS rarely releases liens after the statute of limitations has expired on their own -- you almost always have to do the leg-work yourself.
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