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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • IRS Tax Lien Release and Withdrawal

    Boston_Tea_Party-CooperAre IRS Liens making it hard to sell your home, ruining your credit or are you worried that the IRS will use the lien to take your home or other assets?  You aren’t alone.

    IRS Liens are the most misunderstood aspect of the IRS collection powers and obtaining an IRS tax lien release or withdrawal from the public record can be one of the most difficult things to convince the IRS to do.

    The reason obtaining removal is so difficult is because the IRS doesn’t record tax lien notices in order to improve it’s ability to collect the debt from you.  It records the notice in order to protect it’s rights or priority status in relation to your property against other creditors.

    If the IRS didn’t record these Notices of Lien, it’s rights to your property would be subordinate to a lender or purchaser that came after them.  Filing the lien gives “constructive” notice to everyone – potential buyers and creditors, that it has a superior right to your property.

    As a result, the IRS has very little drive to remove the lien notice until you have paid the underlying debt in full.

    Despite this, there are other ways to get the tax lien removed short of making full payment on the debt:

    • IRS offer in compromise – A successful OIC will result in a lien release
    • Bond – A bond paid to the IRS in the amount of the unpaid tax, penalties and interest, the IRS will release the lien.
    • Statute of Limitations – The IRS has ten years to collect the debt, not including extension periods and at the end of this time-frame, the lien is automatically released.
    • Discharge of Lien – If you have a specific piece of property that is being sold the property can be “discharged” from the lien.  The IRS is paid at closing from any remaining proceeds.
    • Withdrawal if done incorrectly – A tax lien can be “withdrawn”  if the IRS notice was prematurely filed or the IRS didn’t follow its own procedures.
    • Withdrawal if in everyone’s best interest – A tax lien can be withdrawn if doing so  “would be in the best interests of the taxpayer and the government” or it will help get the debt paid sooner.
    • Withdrawal re: IRS Fresh Start Program – A tax lien can be withdrawn as a result of the IRS’ “Fresh Start Program”.  If the total original assessed balance is $25,000 or less and can be paid in 60 months by direct debit the IRS will withdraw the lien after 3 payments are made.

    Lien vs. Levy

    An IRS lien notice is just the IRS’ public announcement that you have a tax debt and the IRS has rights to your property.  These IRS lien notices are filed in the Arizona County where the IRS thinks your property is.

    An IRS levy on the other hand, is the taking of your property from accounts, wages, social security, commissions owed to you…the IRS can even take 1/2 of your non-liable spouse’s income in Arizona because it is a community property state.

    Lien and Credit Reports

    When an IRS tax lien is released, history of the filing stays on the credit report for several years.  Once the lien is filed, it can have negative consequences even after a deal is reach with the government.  Getting to work on the problem long before a lien is recorded is important.

    If your debt is less then $50,000.00 and your arrange a specific type of payment plan based on time that is taken from your bank account each month, the IRS’ internal policy is to not file any tax lien notices.  If your debt is anywhere near the $50,000.00 mark in original assessed balance (not the balance on the bill), and you can afford to divide the debt by 72 months and pay from your bank account, it will make sense to try and pay the debt down in order to avoid the lien filing.

    Filing a bankruptcy will also prevent the lien filing and in certain circumstances, it will make sense to do so.