How to Remove a Tax Lien

There are a handful of completely legal, viable options for removing a tax lien, and we’re here to help.

Appeal the Lien

The IRS will remove a Notice of Federal Tax Lien if you prove that the IRS was in the wrong. A tax lien can be lifted through the tax resolution appeals process if:

• The tax debt is paid in full.
• The lien was falsely filed.
• The IRS did not follow accurate processes.
• The 10-year statute of limitations on collecting the tax debt has expired.
• The IRS did not give you an opportunity to challenge the amount assessed.
• The lien was falsely filed and the IRS made an error when processing your return.
• You were in the process of bankruptcy at the time the lien was filed.
• You want to consider your collection options, like the Fresh Start Initiative.
• You want to make spousal defenses by justifying that the lien is purely your spouse’s liability.

When you receive the lien notice, you can file for a Collection Due Process hearing with the Office of Appeals. To be considered eligible, you must file your request within 30 days after the fifth day of the lien being filed or by the date stated on the lien notification. If this sounds overwhelming, we can provide representation and
file an appeal with the IRS,
or request the lien to be withdrawn for you.

Have the Lien Withdrawn

The notion of having a lien “withdrawn” gives hope to many distressed taxpayers. When a tax lien is withdrawn, it completely removes the lien as if it was never there. This is possible when the taxpayer’s lien is paid off or is proven to be wrongly filed.

Withdrawal is also an option if you qualify for the Fresh Start Initiative, have entered a direct debit agreement, and your tax debt balance is $25,000 or less. It’s important to note that tax liens held at the state level do not have completely comparable lien withdrawal guidelines and may still show on your credit report.

Like state tax liens, tax settlements are also not eligible for lien withdrawal. A settlement, also known as an Offer in Compromise, occurs when a taxpayer and the IRS agree that the taxpayer will pay less than the total tax debt but the payment is considered adequate. Since this is not exact repayment in full, the IRS grants what they call a “release” instead of a withdrawal.

Have the Lien Released

Similar to a lien withdrawal, if you qualify for the Fresh Start Initiative and your balance is less than $25,000, you can apply for the lien to be released.

If you do not request a lien release, your lien will automatically be released 30 days after your debt has been paid in full or you’ve arranged a streamlined installment agreement.

When a lien has been released it is no longer attached to your property and assets, and public records will reflect the change. You should send a copy of the lien release to credit reporting bureaus to update your credit report, however the lien may continue to show on your credit report for up to ten years after the debt has been paid. This is why lien withdrawal is often a more appealing option to taxpayers.

Lien Subordination

Another option for dealing with a tax lien is lien subordination. This method allows another creditor to move ahead of the IRS in priority regarding a property.

A common example is during a home refinance. If a home has a tax lien placed on it, the IRS may allow a lender to move forward with refinancing if the IRS receives a portion of the proceeds.

Lien subordination can be complex and is not always the most favorable option for taxpayers. The IRS will typically allow lien subordination only if it results in a larger or faster payment. Because this process can be complicated, we recommend working with a tax resolution professional.

My Lien Has Been Removed. Now What?

After the IRS has removed your tax lien and you have received your official Notification of Withdrawal or Release, you will need to contact the three credit agencies to ensure your reports are up to date. Follow the steps below to make sure your records are updated as soon as possible so your credit score is not unnecessarily impacted.

Steps to Remove a Lien from your Credit Reports

1. Get a copy of your credit report at AnnualCreditReport.com and check the status of the lien. Credit bureaus will often update the lien automatically.
2. If your lien status has not been updated, contact each credit agency to dispute the lien.
3. The agencies will then contact your county courthouse to verify the information. Each agency will notify you of the results of the dispute.

Experian in particular may request documentation verifying that the lien has been released. Once submitted, they should be able to update the lien status on your report.

How to Avoid a Tax Lien

The best way to avoid a tax lien is by paying your taxes in full and on time. Filing your taxes promptly prevents the IRS from taking further collection action such as filing a tax lien.

Although liens can sometimes be removed, the damage they cause to your credit report can be significant, so it is best to avoid having one filed in the first place.

If paying your taxes in full is not possible, here are other ways to help prevent a tax lien:

• Carefully read and respond quickly to any IRS notices or letters.
• Keep track of your tax status and organize your tax records securely.
• Contact the IRS immediately if you believe a tax lien was falsely filed.
• File an extension and pay as much as possible if you cannot pay your full tax debt by the deadline.
• Set up an installment agreement with the IRS if you cannot pay your full tax debt.
• If an installment agreement is active the IRS will usually not file a lien, but missed payments can trigger one.
• Contact a tax resolution professional if you are uncomfortable dealing directly with the IRS.
• A tax resolution professional can explain your options and help negotiate solutions with the IRS.

If you currently have a tax lien filed against you, Five Stone Tax Advisers can help. Whether you owe money to the IRS, have received a Notice of Federal Tax Lien, or believe a lien was filed in error, our tax attorneys are committed to resolving your tax issues and helping you achieve the best possible outcome.