Release a Tax Lien

How to Release a Tax Lien?

Until you clear your tax debt, you should prove that you are undergoing financial hardship, or the IRS will levy enough assets to put you at even and the tax lien from the IRS will remain. A tax lien does not let the IRS seize your assets, but if you fail to take action following the placement of a lien, they will put a levy on all assets. The lien ensures the IRS is the lawful claimant to your property and you are unable to either put up for sale or dispose of your property without alerting the IRS, who will take a share.

Ways to remove or release a tax lien.

  1. Do nothing: You can wait for the IRS statute of limitations to expire. The IRS has ten years to collect any owed back taxes starting from the date the taxes were originally assessed. It is not recommended to wait for the statute to expire, because during those ten years, the IRS will be taking action against you, including a tax levy, and will take your assets forcibly. However, if there are no assets under your name, or you have discovered ways to protect your assets so the IRS cannot find them, this could be a possible option. However, the other disadvantage of doing nothing is that even after the statute expires and the lien is removed, it will never be removed off of your credit report.
  1. Pay off the whole amount of owed back taxes: If you pay what you owe in back taxes in full, the IRS will remove the tax lien and you will return to the good graces of the IRS. If you are not able to get money to pay the total tax debt based on your current income takings, you can ask for money from family and friends, apply for a loan, borrow money on credit, request a home equity loan, or sell some assets.
  1. Set up an IRS payment plan: If you are willing to pay but cannot give the money in one lump sum, the IRS will assist in providing you with a payment plan option. The most common structure of a payment plan is known as an installment agreement. Individuals must remember though, that even if you sign up for a payment plan, the lien still exists over your assets until your taxes are paid off.
  1. Offer in compromise: You have the ability to file for what is known as an offer in compromise. If this is accepted, the tax lien is removed. An offer in compromise allows you to settle your owed back taxes for a portion of the owed total amount. The only catch is that you need to prove the amount offered is either equal to or more than the amount the IRS is likely to collect if they decide to go forth with enforcing collection actions
  1. Post a bond: You are always able to post a bond to get the lien released. Although, this not a very likely way to settle owned back taxes, because ,if you are capable of posting a bond, then you most likely have enough money to pay the owed back taxes.
  1. Appeal the tax lien filed: Following the IRS filing the lien, they have five days to send you a written notice of the lien. This document must include the line “notice of right to request a hearing.” Any hearing needs to be done within thirty days, starting on the sixth day of the official filing of the tax lien. If your appeal is won, the IRS needs to withdraw the lien. The downside is that even if you are successful with the appeal, the tax lien still shows up on the credit report. Appealing is, therefore, not an effective method for those who still want to maintain good credit.
  1. Request partial discharge: There is a good chance that you have several assets encumbered by the IRS tax lien. You might be able to use an encumbered asset to compensate for the owed back taxes to the IRS. If you choose to do this, you need to request that the IRS discharge that item from the lien. You do not need to fill out a report, but you must send a notice to the IRS detailing the request. For the information you need to ensure that it is in your notice, you need to look up IRS Publication 786 entitled “Application for Subordination of Federal Tax Lien.”
  1. Tax lien assistance from a professional: When dealing with complicated issues, such as a tax lien, tax professionals are the best possible option. They know the different ways possible to have a tax lien released quickly. They examine your current financial situation and assist in locating the most advantageous solution. Tax professionals can be a very important asset to utilize in situations such as this one.
  1. Avoid bankruptcy: Filing for bankruptcy will not get rid of your tax lien. Even if your debts are discharged, the lien does not go anywhere. Any property that is part of the bankruptcy procedure is still exposed to the IRS tax lien. The IRS is able to seize that property once the bankruptcy period is over.

What steps to take if the IRS files a tax lien in error?

Yes, there are times where the IRS slips up and files a notification of a tax lien when you do not owe back taxes to the IRS. You might have paid your bill at a later date and the IRS failed to bring your account up to date. According to the Taxpayer’s Bill of Rights, if this occurs, you are permitted a “Certificate of Release.” This certificate states the tax lien placed by the IRS was done so in error. After you receive the “Certificate of Release,” it is your responsibility to mail photocopies of it to the three main credit bureaus – Equifax, Experian, and Trans Union, to do a damage control and minimize the amount of damage done to your personal credit rating that was the result of an IRS error.

What to do when the tax lien is released.

When the owed tax amount if settled or paid, the IRS issues you Form 668 Z, a Certificate of Release, within thirty days. You must record this certificate and pay the fee for recording it in the state county where the tax lien was filed. It also needs to be sent to the three above mentioned credit bureaus to be placed in the file. Unfortunately, a tax lien stays on the credit report for a maximum of ten years after the Certificate of Release is filed and the tax lien is removed from your assets.