Tax Lien Release/Withdraw
IRS tax liens can be withdrawn the guidance of a knowledgeable tax attorney. If the taxpayer does not pay a tax liability in full and fails to find an alternative method to pay the tax, the IRS may file a Notice of Tax Lien against the taxpayer’s property. § 6320. By filing a lien, the IRS is making a legal claim to the taxpayer’s property as security for payment for the tax debt. (§ 6321) The IRS may only file a Federal Tax Lien after It assesses the liability;
- It sends a Notice and Demand for Payment (a bill that tells the taxpayer how much the taxpayer owe in taxes); and
- The taxpayer neglects or refuses to fully pay the debt within 10 days after the IRS notifies the taxpayer about it.
Once these requirements are met, a lien is created for the amount of the taxpayer’s tax debt. The lien attaches to all the taxpayer’s property (such as the taxpayer’s house or car) and to all the taxpayer’s rights to property (such as the taxpayer’s accounts receivable, if the taxpayer is an employer). It is not necessarily filed in the county clerk’s office.
Releasing a Lien
The IRS may issue a Release of the Notice of Federal Tax Lien (§ 6325) :
- Within 30 days after the taxpayer satisfies the tax due (including interest and other additions) by paying the debt or by having it adjusted, or
- Within 30 days after it accepts a bond that the taxpayer submits, guaranteeing payment of the debt.
In addition, the taxpayer must pay all fees that a state or other jurisdiction charges the taxpayer to file and release the lien. These fees will be added to the amount the taxpayer owes.
If the IRS has not filed it again, the lien will usually released automatically 10 years after a tax is assessed. The taxpayer may sue the federal government for damages If the IRS knowingly or negligently does not release a Notice of Federal Tax Lien when it should be released.
The full amount of the taxpayer’s lien will remain a matter of public record until it is paid in full. However, at any time the taxpayer may request an updated lien payoff amount to show the remaining balance due. An IRS employee can issue the taxpayer a letter with the current amount due in order to release a lien.
Applying for a Discharge of a Federal Tax Lien
If the taxpayer is giving up ownership of property, such as when the taxpayer sell her home, she may apply for a Certificate of Discharge. Each application for a discharge of a tax lien releases the effects of the lien against one piece of property. Note that when certain conditions exist, a third party may also request a Certificate of Discharge. If the taxpayer is selling the primary residence, the taxpayer may apply for a relocation expense allowance. Certain conditions and limitations apply.
By law, a filed notice of tax lien can be withdrawn if:
- The notice was filed too soon or not according to IRS procedures,
the taxpayer entered into an installment agreement to pay the debt on the notice of lien (unless the agreement provides otherwise),
- Withdrawal will speed collecting the tax, or
- Withdrawal would be in the taxpayer’s best interest (as determined by the Taxpayer Advocate) and the best interest of the government.
The IRS will give the taxpayer a copy of the withdrawal and at the taxpayer’s request, the IRS will will send a copy to other institutions.
Appealing the Filing of a Lien
The IRS is required to notify a taxpayer in writing within five days after it files a Notice of a Tax Lien. IRC § 6320. The IRS may give the taxpayer this notice in person, leave it at the her home or her usual place of business or send it by certified or registered mail to the her last known address. The notice, also known as a Collection Due Process notice, must specify the amount of the tax liability and must state that the taxpayer has a right to request a CDP hearing within 30 days. The notice must also outline the administrative appeals rights of the taxpayer and the provisions and procedures to obtain the release of the levy or lien. The taxpayer must file his or her request for a CDP hearing by the date shown on the taxpayer’s notice. It is the customary practice of the Clinic to request a CDP hearing.
Applying for Subordination of the Federal Tax Lien
Taxpayer occasionally refinance a loan to secure a better interest rate or to take some equity out of their property. A recorded federal tax lien has the effect of preventing a lender from refinancing the loan. However, section 6325(d) provides relief for taxpayers by permitting the subordination of a federal tax lien.
For further explanation, feel free to contact our legal counselors. We will walk you through the entire process.