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Release of Tax Liens
Release of IRS Tax Liens – A Notice of Federal Tax Lien is filed by the IRS to give public notice to other creditors (or potential creditors) of the taxpayer’s tax debt and to give the IRS priority of its claim versus the claims of other creditors. If the IRS files a notice of tax lien against you, it could seriously damage your credit for years. Employers, landlords, and others might also view this information unfavorably towards you.
We can advise you in navigating the rules for tax liens and help assess your unique situation to develop a strategy for how best to proceed. Immediately paying off the taxes reflected on an existing tax lien might not necessarily be in your best interest if you are unable to pay off all of your tax obligations particularly if there are taxes owed in later years. Obtaining sound professional advice to develop a comprehensive strategy before setting out to rectify outstanding tax liens might potentially save you considerable amounts over time.
There are several ways in which a tax lien can be released, removed or withdrawn. The most obvious, is to pay the back taxes owed. Another way is to post a bond. Unfortunately, these options are not practical to taxpayers who are financially unable to pay off the amount due.
Other methods for addressing a tax lien include appealing the lien filed. This is done by requesting a hearing within 30 days of the sixth day after the lien filing (see IRS document titled “Notice of right to request a hearing” that the IRS is required to provide after filing the lien). Unfortunately, even if you win the appeal, the fact of the lien will still appear on your credit report.
Another possibility for having a lien released is by making an Offer In Compromise (see separate tab). Once an Offer In Compromise is accepted and paid in full, the IRS must release an associated tax lien within 30 days.
Probably the most practical method for a financially strapped taxpayer to have a lien withdrawn is for a taxpayer to enter into an installment agreement under one of the Service’s new Fresh Start initiatives. Unfortunately, one of the requirements to qualify for this program is that the amount owed must be $25,000 or less. The lien withdrawal provision generally applies to Form 1040 liabilities for individuals, income tax liabilities for ongoing businesses, and out of business entities with any type of tax debt. We can assist taxpayers who can meet these and certain other requirements of this program, to enter into such an agreement and have the IRS tax lien withdrawn.
It should be noted that even if a tax debt is discharged (i.e. wiped out) in bankruptcy, the tax lien remains. If the taxpayer owned any real estate at the time they filed for bankruptcy protection, such property is still subject to the tax lien. This lien could result in the taxpayer having to pay over proceeds from the subsequent sale of the real property to satisfy the lien. (You should consult with a bankruptcy attorney regarding your specific situation.)