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IRS Tax Liens – How to Remove a Tax Lien

IRS Tax Liens – How to Remove a Tax Lien

IRS Tax Liens – How to Remove a Tax Lien

In the last blog post, we discussed what property an IRS tax lien can reach and how it can impact you. Now we discuss how to remove a tax lien once it has been filed.

Before we get into how to remove a tax lien, I need to address something first. Many prospective clients call me about their tax debt and one of their big concerns is removing the notice of federal tax lien. This is easier said than done. The IRS believes that tax liens are the least intrusive means to collect unpaid taxes. Whether that is true or not, the IRS will rarely remove a lien, so temper your expectations accordingly.

Means to Remove a Tax Lien

Of all the options I am going to discuss, almost every one of them only removes the Notice of Federal Tax Lien and not the tax lien itself. As a reminder, the tax lien (called a silent lien) is filed by the IRS after you fail to pay the taxes due, upon notice and demand for payment. Only you and the IRS know about it. The Notice of Federal Tax Lien, however, is a public posting of your tax debt. Now the whole world is on notice of your tax debt.

The IRS understands that for some people the notice may negatively impact them and so offers some solutions to remove the notice. Only when the property is sold will the IRS remove the lien and notice so you can complete the sale. I will try and make that distinction clear when I discuss each option.

  • Paying your tax debt in full. I put this in as a joke of sorts. The IRS posted it on their website and so I share it here. I assume that if you could fully pay the tax debt you would.
  • Discharge of property from under the lien and notice. A lien discharge removes the lien from specific property so you can sell the property, usually to third parties but I have also had property sold to family members who do not owe anything to the IRS.
  • Subordination of the tax lien. A subordination does not remove the lien or the notice. Instead, a subordination allows another creditor to move ahead of the IRS’s lien, often in a refinance situation.
  • Withdrawal of the Notice of Federal Tax Lien. A withdrawal does not remove the IRS tax lien. Instead, the withdrawal removes the public Notice of Federal Tax Lien only. This is the option used if the Notice of Federal Tax Lien may cause you to lose your job (for example, a government job). You still owe the tax debt but other creditors and the public no longer have notice of this fact.
  • IRS Direct Debit Installment Agreement. You can also get the Notice of Federal Tax Lien withdrawn if you qualify for a special program offered by the IRS. For 95% of the taxpaying public, the amount due is less than $25k. So you may be able to get the notice withdrawn by setting up a direct debit installment agreement, meaning you pay by direct withdrawal from a bank account. The qualifications are listed below.
    • If 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)
      • 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)
      • Set up a Direct Debit Installment Agreement to full pay the amount due within 60 months or before the collection statute expires, whichever is earlier.
      • Are in full compliance with other filing and payment requirements
      • Have made three consecutive direct debit payments
      • Haven’t defaulted on a current, or any previous, Direct Debit Installment agreement

Summary

Getting an IRS tax lien removed is not impossible but very hard. Often, you can get the Notice of Federal Tax Lien removed rather than the lien altogether. While this may seem harsh, the IRS considers tax liens to be the most effective means to collect a tax debt. Still, the options listed above still provide a means to remove the notice in cases where you need to protect your job, sell your home, or maybe do a refinance to pay off or pay down your tax debt. In my next blog post, we will talk about some of the ways you can avoid a tax lien being filed on your property.

Contact Us

I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your unpaid taxes, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.

James D. Wade, Esq.
Law Office of James D. Wade
57 Portland Road, Unit 3
Kennebunk, ME 04043
207-502-7181
jwade@jdwadelaw.com
www.jdwadelaw.com