Are You Facing a Federal Tax Lien?
We can help with IRS lien release, withdrawal, subordination and discharge.
Federal Tax Liens
A tax lien is a creditor’s claim against the property of a debtor. It reserves the right of the creditor to proceeds from the sale of that property, in the event the debt is not paid.
The IRS uses liens to protect the government’s interest in tax payments. If you owe federal back taxes, the IRS may apply a lien to your property.
Liens, like levies, can make the experience of an IRS tax debt even more stressful. Understanding the lien process and your options will make it easier to avoid or respond to an IRS lien.
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The IRS Tax Lien Process
The IRS will place a lien on your property only after sending a bill for taxes owing and demand for payment. The first notice of taxes owing will include a payment deadline of ten days. If you do not pay within that timeline or make arrangements to pay, the IRS may proceed with a lien against your property.
A lien takes effect when the IRS files a public document called a Notice of Federal Tax Lien. The notice lets creditors and potential creditors know that the IRS has a legal claim to your property. Federal tax liens can be applied to any personal property and business assets, including accounts receivable.
How will this affect you financially?
The Notice of Federal Tax Lien publicly notifies your creditors that the IRS has a claim against your property. This lien equally applies to any property acquired by you after the Notice of Federal Tax Lien is filed.
The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Even after an IRS tax lien is released and removed from your county records, Credit Reporting Agencies may retain the record of a lien. By some estimates, those records will be dropped from your credit report after 15 years.
An IRS lien will also limit your freedom to sell your home, car or any other assets. Should you sell property under lien, the IRS will have a claim to any money generated from the sale.
Releasing a Federal Tax Lien
When the IRS releases a lien, it no longer encumbers your property and your records are updated to reflect the release. However, the release of an IRS lien does not remove the federal tax lien from your credit report. The record of the lien will remain on county records for up to ten years.
The IRS will release a lien within 30 days when you have satisfied your tax debt in full, including interest and penalties.
The lien will also be released if the statute of limitations on IRS collections runs out before your tax debt is paid. The IRS is legally required to stop collections—and release any lien—ten years after the taxes are assessed.
If you cannot pay in full, and if your tax debt is relatively new, you do have other options. Under the Fresh Start Program, the IRS will release a lien when you enter into a Guaranteed Installment Agreement or a Streamlined Installment Agreement (with some conditions).
There are other options, as well, if you don’t qualify for a release of the federal tax lien.
IRS Lien Withdrawal
An IRS Lien Withdrawal removes the public Notice of Federal Tax Lien, as if the lien was never originally filed. A withdrawal does not, however, clear your tax liability. It simply wipes the lien from your record.
A Withdrawal can be requested when you have paid your federal tax balance in full, to clear your credit record. The same applies if the statute of limitations on your tax debt has passed and you no longer owe the IRS.
Likewise, if you can prove that the lien was filed in error, you are eligible for IRS Lien Withdrawal.
The IRS may also entertain Lien Withdrawal before your debt is cleared, if you demonstrate efforts to gain compliance and pay the debt. This includes filing all tax returns (business and individual) in a timely manner, over a three-year period, and complying with estimated tax payments or federal tax deposits.
In other cases, the IRS will sometimes consider a Lien Withdrawal if doing so will facilitate the repayment of the debt.
IRS Lien Discharge
A Lien Discharge permanently eliminates a Federal Tax Lien and allows you to sell your property free of the IRS claims.
A discharge can be secured for a particular piece of property—a car, for example. If approved, a discharge removes the lien from that piece of property, while leaving the lien in effect for other property.
There are several eligibility requirements, but to qualify, you must demonstrate that a discharge is in the best interests of the IRS. The IRS may approve a discharge if:
- The value of your remaining property under the federal tax lien is equal to at least twice the amount of tax liability and any other encumbrance on your property (e.g., mortgages, state or local taxes and private liens);
- A minimum acceptable amount is paid on the tax liability;
- The debts that preceded the federal tax lien are greater than the fair market value of the property or greater than the sale value of the property;
- A deposit or bond can be offered the IRS, equal to half of the government’s interest in the property under lien;
If you are considering an IRS Lien Discharge, the following factors will impact the outcome:
- Can you sell the property for more than the amount of the lien?
- What are the total liabilities and claims against the property?
- Are there creditors that have claims ahead of the IRS?
IRS Lien Subordination
A Lien Subordination does not eliminate a lien, but it does give you some flexibility with your property and can relieve financial pressure.
Lien Subordination allows other creditors to move ahead of the IRS in their claims against your property. This makes it possible to undertake financial transactions involving property under lien.
The IRS will consider Lien Subordination if it increases your ability to pay the taxes owing.
If, for example, refinancing your property will free up cash to pay your tax debt, the IRS may approve a Lien Subordination. In effect, the IRS would be giving the mortgage holder (e.g., your bank) first claim on the property if you were to default. To accept this risk, there must be a strong case that you will be in a better position to pay your debt.
The IRS may also approve a Lien Subordination if it is necessary to obtain the approval of other creditors to sell your property. In the case of the sale of a home, the mortgage holder would be paid first, and the IRS could lay claim to the remainder.
Get Expert Advice to Resolve Your Federal Tax Lien
If you have an IRS back tax debt and are worried about a lien, or if your property is already under lien, we can help. Get a free consultation with Precision Tax Relief to discuss the best options for avoiding or lifting a federal tax lien. If you already have a lien, we’ll assess whether you may be eligible for a release, withdrawal, discharge or subordination.
You can trust us to work for your best interests. In more than 700 reviews, we have a 98% client satisfaction rating—more than any other tax relief agency.
Get Help Stopping a Federal Tax Lien
Start with a no-obligation, free consultation now: 1-855-212-5900
Or click here to request a callback
FAQs on Federal Tax Liens
What is the difference between an IRS lien and a levy?
A tax levy is a seizure of property, such as money in your bank account, part of your wages or other assets. When the IRS levies your property, they remove it from your possession. A tax lien, on the other hand, secures the IRS’ interest in your property. It gives the IRS a claim to your property should you fail to pay the debt by other means.
I owe back taxes. Will the IRS put a lien on my property?
Unless you have made arrangements to pay the back taxes, the IRS will most likely file a lien on your property. Even with some installment agreements, a lien is likely. However, as discussed in this article, there are options for having a lien lifted.
I haven’t filed my taxes. Can the IRS put a lien on my property?
Yes, the IRS can file a lien on your property if you have not filed taxes. The IRS can file a substitute filing on your behalf and assess you as owing taxes. When this happens, you will receive notice and demand for payment from the IRS before a lien is filed.
How can I avoid an IRS lien?
The best way to prevent an IRS lien is to make arrangements to pay your taxes as soon as possible. Act immediately when you receive notice from the IRS that you have been assessed as owing back taxes.
If you cannot pay the balance in full, talk to a tax professional about your options. You may be eligible for a settlement, a payment plan or hardship status. Once you come to an agreement with the IRS, the best way to prevent a lien is to comply with the terms of the agreement.
If you believe an error was made or there are mitigating circumstances, you still should not ignore the IRS demand for payment. Contact the IRS directly or through a tax relief specialist to clarify the taxes assessed.
I received notification from the IRS of a lien. Now what?
Depending on your eligibility, you may be able to seek lien release, withdrawal, discharge or subordination. Talk to a tax relief specialist to find out which alternative may apply to your financial situation.
Does a lien increase the amount I owe the IRS?
The lien doesn’t change the amount you owe to the IRS. However, as long as the back taxes are unpaid the IRS will continue to charge you interest and late payment penalties on the balance due.
How will a federal lien affect my credit rating?
Any type of lien can make it harder to obtain credit. The lien is on public record and appears on your credit report. When the lien is withdrawn, it will eventually be removed from your credit report, though sometimes this can take several years.
How can I get an IRS lien removed from my credit report?
You can apply for Lien Withdrawal, which removes the lien from county records. However, Credit Reporting Agencies are under no obligation to automatically remove the record of the lien from your credit report. It will be necessary to dispute the tax lien with Equifax, Experian or TransUnion. These agencies will confirm the Lien Withdrawal with the courthouse where your lien was filed, at which point they should remove the lien from your credit report.
What is the statute of limitations on an IRS lien?
The Collection Statute Expiration Date (CSED) is the date on which the IRS can no longer legally seek to collect back tax debts. It is also known as the statute of limitations on IRS collections. If you reach the CSED on your debt, the liability is cleared, you no longer owe the IRS and the lien will be released.
The CSED is 10 years from the date the tax debt was assessed, but the clock on the statute can be stopped in a variety of scenarios: filing of bankruptcy, a submission of an Offer in Compromise or an appeal to the IRS can suspend the running of the CSED. For this reason, you should confirm your CSED date.
Will filing bankruptcy remove an IRS lien?
Usually, bankruptcy does not lift a tax lien. The IRS may continue to hold a lien after bankruptcy.
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