Once the IRS tax lien is in place, it generally will not release it unless the balance owed is paid in full or there is another justification for removing it (such as it was filed erroneously or is for a year that is no longer subject to collections). Think of it from the IRS’s perspective. The government has a tangible security interest in your real or personal property. Why would they want to give up that interest without getting what is owed to them? IRS tax liens act as a security blanket for the government to ensure that their interest is protected just like any other creditor. Unlike a levy, liens create no immediate hardship to the taxpayer (other than the fact that they destroy the taxpayer's credit). As such, it usually takes a compelling reason to convince the IRS to release a lien. However, with that said, there are a few remedies that may be helpful for taxpayers affected by a tax lien.
Lien withdrawal is one remedy that taxpayers can seek from the IRS. If possible, you want to try to get liens withdrawn than simply released or subordinated. The reason for this is that a withdrawn lien can be removed from your credit report and should not negatively impact your credit score. However, the IRS will only withdraw liens under certain circumstances (the negative impacts of a tax lien are a measure that is meant to provoke taxpayer compliance). First, under the Fresh Start program, liens can be withdrawn if the underlying liability surrounding the lien has been paid in full and the taxpayer meets certain compliance requirements. In order to get a lien withdrawal granted, taxpayers must have filed all tax returns that are currently outstanding (including any informational returns) and must also be current on all estimated tax payments and withholdings.
Additionally, taxpayers can get a lien withdrawn after the fact by entering into a direct debit installment agreement with the IRS. A direct debit installment agreement is one where the taxpayer agrees to have monthly payments taken directly out of the taxpayer’s bank account. This accomplishes two purposes for the IRS. First, it virtually guarantees automatic payments every month if the taxpayer has sufficient funds in the account to make their monthly payments. Second, in the case that the taxpayer does default on the agreement, it does provide a readily available levy source. Direct debit installment agreements can be requested via calling the IRS directly or by filling out Form 433-D. Finally, liens will be withdrawn if the taxpayer can prove that they were filed in error. However, the IRS will usually not withdraw liens automatically and the taxpayer must complete a lien withdrawal request with the IRS. Lien requests can be submitted to the IRS via Form 12277.
Our best stuff: secrets, tax saving tools, and tax defense strategies from the braintrust at Brotman Law.
These ten big ideas will change the way you think about your taxes and your business.
Find the articles and videos you need to make the right tax decisions in the learning center.
It is not just about what we do, but who we are, why we do it, and how that benefits you.
Meet with us to outline your strategy. No further obligation, 100% money-back guarantee.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.