Having the IRS place a lien against your property can be humiliating. It is on public record and the consequences are far-reaching. Your home or business or other assets are in serious jeopardy of being taken away from you. You vendors may be reluctant to do business with you and the embarrassment stress carries over into your home life. An IRS lien also wrecks your credit rating.
We understand completely. You want to get rid of that lean … FAST. And there are ways to do it other than paying your tax debt, especially if you are unable to pay it. There are lien releases and partial lien releases, to name a few.
A lien is serious business. That is why I would advise you to sit down with an experienced tax attorney to discuss your lien and what we can do to remove it. Hopefully, after you have read this chapter, you will have a better idea of why the IRS places tax liens and how you can avoid it.
One of the biggest debates in the tax practitioner community is the efficacy of IRS tax liens. On one hand, IRS tax liens help the government protect its interest in a taxpayer’s property and secure the underlying tax obligation with real or tangible personal property.
On the other hand, liens damage a taxpayer’s credit, place an obstacle in the way of the taxpayer selling that property or borrowing against it in order to pay off their liability, and generally do nothing to satisfy the immediate concern of the IRS. Furthermore, it is extremely difficult to get a lien release and liens are a noted hassle to dispose of once they have been filed against a taxpayer.
However, there are a number of things that the taxpayer can do if they are affected by a federal tax lien in order to secure a lien release or achieve some other workable solution that allows them to make progress on the account. After all, the IRS is simply seeking a workable resolution to the problem.
Avoiding an IRS Tax Lien
First of all, although it may go without saying, the easiest way to not have to worry about federal tax liens is to not get them in the first place. Being compliant with your federal tax obligations is a 100 percent guaranteed way to avoid a tax lien. Even if you are not entirely compliant, getting a head start on a workable resolution is a great way to avoid a lien.
Generally speaking, it is much easier to avoid a lien in the first place than having to worry about having to secure its release later. If you get out in front of your IRS tax obligation and are proactive about getting on a payment plan or making arrangements to pay the liability in full, you will likely avoid a lien.
Tax liens, in any form, utilize IRS resources to get put into place. If the IRS knows that you are working on resolving your tax issue, it will likely deprioritize placing a lien on your account. As the IRS states on its websites, tax liens are reserved for taxpayers who are notified that they have a balance due and do not take steps to resolve their liability.
Simple contact with the IRS goes a long way in avoidance of a federal tax lien.
Along those lines, the IRS generally does not go through the trouble of placing a lien on taxpayers who owe smaller liabilities. Under the new IRS Fresh Start Program, the IRS raised the threshold for placing a federal tax lien on an account from $5,000 to $10,000.
This does not necessarily mean that the IRS will not place a tax lien on you if you owe less than $10,000, but generally, absent truly compelling circumstances, it is not going to bother. If you owe slightly more than $10,000, you might consider making a partial payment to the IRS in order to drop yourself under that threshold.
If you owe more than $10,000, but less than $25,000, placing yourself on an installment agreement prior to a lien being filed will also usually prevent a tax lien from being filed in the first place.
In certain circumstances, usually by agreeing to have my clients set up on direct debit, I have also avoided tax liens for my clients who have balances of up to $50,000. In general, the IRS is going to take a harder look at accounts with balances over $50,000, so for lien avoidance purposes it is definitely advisable to keep yourself under this threshold.
 See http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Understanding-a-Federal-Tax-Lien
 Details about making payments to the IRS can be found here: http://www.irs.gov/Payments/Make-a-Payment
 Information on the IRS Fresh Start program can be found here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Fresh-Start-Notice-of-Federal-Tax-Liens
IRS Tax Lien Withdrawal
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.
 IRS Form 433-D can be found here: http://www.irs.gov/pub/irs-pdf/f433d.pdf
 Form 12277 is available here: http://www.irs.gov/pub/irs-pdf/f12277.pdf